Thursday was another example of inexplicable price action, with stocks rallying even as the weekly jobless claims number spiked, setting the stage for what’s going to be an unsurprisingly dismal April jobs report before the open Friday morning.
Source: Provided by Finviz
- The S&P 500 rose 1.15%.
- The Dow Jones Industrial Average added 0.89%
- The Nasdaq Composite climbed 1.41%
- Underscoring just how wacky things were today, bad news king Boeing (NYSE:BA) was actually the Dow’s best-performing component, gaining 5.64%.
As noted above, stocks faced off yet again with a grim set of initial jobless claims data. For the week ending May 2, 3.17 million Americans filed for first-time jobless benefits, bringing the total number of claims filed since the start of the Covid-19 outbreak to a staggering 33.5 million. The only good thing about the most recent claims number is that it was lower than the prior week.
We’ll get a more definitive number tomorrow with the April jobs report, but right now it looks like the U.S. unemployment rate is 15.5%, which is depression-level territory. Making matters worse with the most recent batch of claims is that California and Texas — the two largest states by economy — were among the joblessness leaders.
Over the course of U.S. economic history, there are instances where California’s economy thrives and Texas’s flounders, or vice versa, and the broader national economy survives. However, it’s improbable for the U.S. economy to thrive if both California and Texas are tanking at the same time.
Still, half of the 30 Dow stocks were higher in late trading and while that’s a great percentage, some of the index’s biggest components were in the green.
The technology sector is getting plenty of praise these days, deservedly so, not simply because it’s the largest sector weight in the S&P 500. Don’t look now, but while that index and the Dow are still in the red on a year-to-date basis, the Nasdaq Composite moved into positive territory with today’s gains.
That move was supported by the usual suspects, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), which jointly account for a massive percentage of the Nasdaq Composite. Those stocks traded slightly higher today.
As I noted yesterday, Caterpillar (NYSE:CAT) could be a near-term dividend offender and fellow Dow stock Disney (NYSE:DIS) joined that ominous group on Tuesday, but with so much negative dividend news this year, some market observers are looking at the companies that are going the other way.
Among Dow dividend raisers to this point in 2020, there’s the aforementioned Apple, International Business Machines (NYSE:IBM), Johnson & Johnson (NYSE:JNJ), Procter and Gamble (NYSE:PG) and Travelers (NYSE:TRV).
Good News From Bad News
Here’s an interesting tidbit: JPMorgan Chase (NYSE:JPM) and American Express (NYSE:AXP), the Dow names with the most exposure to weakening consumer credit quality, each closed higher today on reports that consumers are taking the opportunity to pay down debt.
Said another way, with limited options beyond online shopping and food delivery to spend on the discretionary side, it looks like many consumers are saying “Hey, let’s trim some of that credit card debt.” Should that trend continue, it could allay concerns that Amex and JPMorgan could be hit with a slew of charge offs in a recession.
Bottom Line on the Dow Jones Today
Tomorrow’s jobs report will probably show a ghastly unemployment rate of 16%, but this week’s market action suggests investors are willing to gloss over that number in anticipation of the economy reopening. That’s going to be a slow roll, but with some positive signs emerging, including Nevada releasing a plan to reopen casinos and California relaxing some restrictions this week, market participants are betting on the “things are heading in the right direction” theme.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
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