- The Dow Jones was intensely volatile Thursday but headed higher in late afternoon trading.
- Initial jobless claims painted a dire employment situation in the U.S.
- Even Trump’s Volcker Rule rollback couldn’t get Dow bulls that excited.
A volatile day for the U.S. stock market saw the Dow Jones turn higher immediately before the closing bell.
Jobless claims remain concerningly high, while worries about the expiration of stimulus next month continue to weigh on equities.
Even Donald Trump’s risky gambit to roll back Volcker Rule bank protections failed to get Wall Street overwhelmingly excited.
Dow Fluctuates But Heads Higher in Late Trading
All three of the major U.S. stock indices shook off earlier weakness to spike to session highs ahead of the closing bell. Here’s where they stood at 3:42 pm ET:
- The Dow was up 212.17 points or 0.83% at 25,658.11.
- The S&P 500 had gained 0.78% to trade at 3,073.98.
- The Nasdaq had rallied 0.72% to 9,980.4.
The catalyst for the late-session move was not immediately clear.
While many Dow bulls are still dreaming of a V-shaped recovery, those hopes are fading. The primary engine of the U.S. economic powerhouse is still fragile.
Initial jobless claims remain stubbornly high, and despite many states reopening, the employment situation remains dire.
ING: Dial Back GDP Forecast If No Stimulus Extension in July
Throwing fuel on this fire, one of the most significant supports to consumer spending is expiring next month.
Barring legislative action, the additional $600 unemployment benefit will vanish at the end of July. And with virus hotspots continuing to flare up, the risk that many service jobs do not come back is on the rise.
Economist James Knightley at ING believes that the latest jobless numbers will pile pressure on the White House to use its influence to persuade Republican senators to back an extension. But time is running out.
Knightley wrote today:
With the US$600 boost to weekly unemployment benefits scheduled an end on 31 July, we may be about to enter an uncertain period for household incomes and, by extension, consumer spending. The pressure will undoubtedly build for additional fiscal support in the next few weeks, otherwise, forecasts for the 2H20 rebound may well need to be scaled back.
If Wall Street is pressuring Congress to do more, it looks to be working. Donald Trump has come out in favor of more stimulus, much to the chagrin of the remaining fiscal hawks in the GOP.
Dow 30: Disney Backtracks, Financials Surge on Volcker Rollback
On a mixed day for the Dow 30, there was more trouble for Boeing. The aerospace giant continued its dramatic slide with a 1.4% loss.
The index’s most heavily weighted stock, Apple, rose 0.7%.
Disney stock (-0.7%) struggled after the media giant announced it would be suspending the reopening of its California parks and hotels.
The biggest boost for the Dow Jones was a broad rally in financial stocks. JPMorgan and Goldman Sachs both defied plunging yields to bounce more than 3%.
Driving this bounce was some relaxation to the Volcker Rule, which will free up cash reserves for banks to make venture capital investments.
A controversial move, critics warn it could make the banks more vulnerable to a credit squeeze. But it is in line with Trump’s deregulatory agenda.