US futures rise ahead of jobless claims and Fed speeches, while oil extends rally as outlook brightens

A trader works at the New York Stock Exchange (NYSE) in New York, U.S., February 4, 2020. REUTERS/Bryan R Smith
A trader works at the New York Stock Exchange

US stock index futures climbed on Thursday as investors awaited the release of weekly jobless claims data and prepared to digest a series of speeches from Federal Reserve officials.

Meanwhile, oil prices extended their rally as the outlook for the global economy brightened, with vaccine rollouts spurring expectations of strong demand for energy in the coming months. Oil is on course for a third straight monthly gain in June.

In Europe, stocks rose ahead of the Bank of England’s interest rate decision. It is expected to leave monetary policy on hold but investors will scrutinize the decision for signs of concerns about inflation, which jumped above the Bank’s 2% target in May.

Futures for the US benchmark S&P 500 rose 0.41%, after the index slipped slightly on Wednesday. Dow Jones futures climbed 0.4% while Nasdaq 100 futures gained 0.54%.

Europe’s Stoxx 600 rose 0.59% in early European trading, while London’s FTSE 100 was 0.2% higher. China’s CSI 300 climbed 0.17% overnight while Japan’s Nikkei 225 was flat.

Investors awaited US jobless claims data on Thursday, after a quiet week on the economics front. Economists expect weekly initial jobless claims to drop below 400,000, after a surprise rise to 412,000 the previous week.

John Williams, the President of the New York Fed, and Raphael Bostic, Atlanta Fed President, are among the key central bank officials making public comments on Thursday. Investors will parse their words for any hints about the future direction of US monetary policy.

On Wednesday, Dallas Fed President Robert Kaplan said he thought the central bank would have to start cutting back its support sooner than people expected, moving markets somewhat.

“As we make substantial further progress… I think we’d be far better off, from a risk-management point of view, beginning to adjust these purchases of Treasuries,” he told Bloomberg.

The yield on the key 10-year US Treasury note climbed 1.3 basis points to 1.5% on Thursday. The dollar index slipped 0.08% to 91.73.

Jeffrey Halley, senior market analyst at currency group Oanda, said the light economic calendar means “we will remain at the mercy of Fed-speak and a schizophrenic intra-day market.”

However, investors will get a clearer sense of what global central banks are thinking about inflation and their support packages when the Bank of England makes its interest rate decision at 7.00 a.m. ET.

Elsewhere in markets, oil prices extended their rally. Brent crude rose 0.6% to $75.64 a barrel while WTI crude climbed 0.53% to $73.47.

Prices have risen by almost a quarter in the last three months, as the outlook for the global economy has brightened, and investors feel secure that the OPEC+ group of oil producing countries will closely manage supply.

Bitcoin’s recovery – which saw the price rise above $34,000 on Wednesday and dropping below $30,000 a day earlier – ran into trouble. The cryptocurrency was down 0.4% on Thursday at $32,913.

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The labor market is the strongest it’s been since the pandemic started – and setting up a huge boost to America’s most crucial economic engine

Oculus New York
  • Tumbling jobless claims signal the labor-market rebound is entering full swing as the US reopens.
  • Improved hiring can boost consumer spending, which accounts for 70% of economic activity.
  • Stimulus boosted retail sales higher in March, and a stronger labor market can lift spending further.
  • See more stories on Insider’s business page.

For several months during the pandemic, the labor market lagged other gauges of economic health.

As manufacturers rebounded and Americans spent their stimulus checks, hiring remained stagnant, falling short of a V-shaped recovery as COVID-19 cases surged during the winter.

This was seen in payroll growth – perhaps the most closely watched monthly indicator – which slowed in the fall and even turned negative in December amid increased restrictions. And new filings for unemployment, while down from their early 2020 highs, stayed elevated.

But then came March, and the literal green shoots of spring were accompanied by the figurative indicators of economic recovery.

US payroll growth saw its biggest jump since August, while the unemployment rate declined to a fresh pandemic-era low. The progress has prompted Wall Street titans to adjust their forecasts higher to reflect several months of robust job gains.

Data published Thursday added to the encouraging outlook as jobless claims fell to a pandemic-era low. And with more Americans returning to steady employment, spending – a key driver of economic growth – stands to swing higher.

“The economy, at this point, does seem to be at a bit of an inflection point,” Federal Reserve Chair Jerome Powell said Wednesday, adding that the March jobs report shows what faster growth can look like.

Where hiring accelerates, so does spending

A rapidly healing labor market can be exactly what shifts the recovery into a higher gear. Employment, and the steady income that comes with it, leads Americans to spend more. That spending leads businesses to hire more as they look to service stronger consumer demand.

Consumer spending accounts for roughly 70% of economic activity, and the nature of the coronavirus recession made sales data even more relevant to tracking the recovery. Lockdown measures kept Americans from spending at physical retailers, and the record-high unemployment rate seen at the start of the crisis also cut down on activity.

The government filled in some of the hole with its unprecedented stimulus packages. Retail sales – a popular proxy for overall spending – soared 7.6% in January as people deployed $600 direct payments included in President Donald Trump’s stimulus bill.

That dynamic repeated itself last month. Retail sales surged 9.8% in March to the highest level on record, the Census Bureau said Thursday. The increase is widely attributed to Democrats’ $1.9 trillion stimulus measure, as well as faster vaccination, warmer weather, and relaxed business restrictions.

“The payments were two-and-a-half times bigger than in January, so the consensus forecasts always looked timid,” Ian Shepherdson, chief economist at Pantheon Macroeconomics said, adding sales should rise again in April before trailing as Americans shift spending to non-retail outlets.

Higher employment can also replace stimulus as a steadier boost for spending. While stimulus does swiftly drive spending higher, most of the direct payments go toward saving and paying down debts, according to Federal Reserve research. Last month’s sales data also suggests the stimulus bump fades quickly. After spending jumped in January, it declined 2.7% the following month. Employment, on the other hand, provides the means for more stable consumption.

Economists already incorporated the stronger spending and jobless claims data into their outlooks. JPMorgan’s forecast for March GDP leaped to 1.6% from 0.7% growth, according to its nowcaster model. The firm’s first-quarter growth estimate rose to 4.5% from 3.5%.

The cost of an upward spiral? Inflation

But with stronger consumer demand comes inflation. Price growth has become the indicator to watch as the country edges toward a full recovery. Those opposed to Biden’s spending plans have warned of rampant inflation fueling a new economic downturn. Others view the administration’s stimulus as necessary to avoiding the plodding recovery seen after the Great Recession.

Indicators signal stronger inflation is at the country’s doorstep. The Consumer Price Index – a commonly used gauge of price growth – gained more than expected last month amid the spending surge. To be sure, officials including Fed Chair Powell and Treasury Secretary Janet Yellen have said they expect stronger price growth to be temporary.

But years of elusive inflation dynamics suggest the central bank and the Biden administration have a looser grip on price growth than they’d like.

“Economists don’t fully understand why we’ve had low interest rates and low inflation in the last decade. And that’s problematic because we don’t know under what circumstances that will change,” Laura Veldkamp, professor of economics and finance at Columbia University, told Insider. “The risk is, this is a ton of spending that … will trigger a bunch of inflation. And those high interest rates will mean that this new debt we’re taking on is going to become incredibly expensive to service.”

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US weekly jobless claims rise less than forecasted to 745,000 as stimulus nears key vote

unemployment jobless claims
  • US jobless claims totaled 745,000 last week, a slight increase from the prior week’s revised 736,000 total.
  • The reading comes in just below the consensus economist estimate of 750,000 claims.
  • Continuing claims dropped to 4.3 million for the week that ended February 20.
  • Visit the Business section of Insider for more stories.

The number of people filing for unemployment insurance in the US rose less than estimated as Democrats neared a critical vote on President Joe Biden’s stimulus proposal.

New jobless claims reached an unadjusted 745,000 for the week that ended Saturday, according to the Labor Department. The median estimate from economists surveyed by Bloomberg was for 750,000 claims. The reading comes in above the previous week’s revised count of 736,000 claims.

Continuing claims, which track Americans receiving unemployment benefits, declined to 4.3 million for the week that ended February 20, in line with economist expectations.

“We expect the trend to fall sharply over the next few months, provided the new Covid variants don’t trigger a spring wave in cases and, more importantly, hospitalizations,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said. “The jury is still out.”

More than 80 million filings for unemployment benefits have been made since claims first shot higher nearly one year ago. That sum dwarfs the 37 million filings made during the Great Recession. All weekly readings since March still exceed the high of 665,000 from the previous downturn.

 

The claims data comes one day after ADP published its monthly count of private payroll additions. The US private sector added 117,000 jobs in February, according to the Wednesday report. The gains come in well below the 200,000 private payrolls expected by economists, signaling a weaker labor market recovery than hoped.

A more detailed look at how hiring fared last month will emerge when the Bureau of Labor Statistics publishes its monthly nonfarm payrolls data. Economists expect the report to show the US adding 198,000 payrolls in February.

The millions of Americans still jobless could soon receive fresh aid from Washington. House Democrats approved the $1.9 trillion American Rescue Plan Act on Saturday, teeing the stimulus package up for a Senate vote in the coming days. The deal includes $1,400 direct payments, a $400 boost to unemployment benefits, and state and local government aid.

Democrats are still split on some tenets of the package. More moderate members of the party have pushed a smaller, $300-per-week supplement to federal unemployment insurance. Others are debating whether the boost should end in August as established in the package or in September.

Compromises have already been made as a result of this moderate pressure. Biden on Wednesday approved a faster phaseout for stimulus checks that leaves individuals earning more than $80,000 and couples making more than $160,000 without payments.

With the Senate vote looming and Democrats needing all 50 Senate members to back the measure, additional changes could be made to shore up support.

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US weekly jobless claims drop more than expected to 730,000 as economic recovery pushes forward

New York Unemployment Strike
  • US jobless claims totaled 730,000 last week, down significantly from the previous week’s revised total of 841,000.
  • The total also comes in below the economist estimate of 825,000 claims.
  • Continuing claims fell to 4.4 million for the week that ended February 13.
  • Visit the Business section of Insider for more stories.

The number of Americans filing for unemployment benefits declined more than expected last week, signaling the labor market recovery is still recovering, albeit at a modest pace.

New jobless claims reached an unadjusted 730,000 for the week that ended Saturday, the Labor Department announced Thursday morning. Economists surveyed by Bloomberg expected the reading to come in at 825,000 claims. Last week’s total is also below the previous period’s revised count of 841,000 claims.

Continuing claims, which track Americans currently receiving unemployment benefits, dropped to 4.4 million for the week that ended February 13. Economists projected continuing claims to decline slightly to 4.5 million.

While down significantly from spring 2020 levels, jobless claims wavered around 800,000 for weeks amid slowed hiring activity. Weekly counts still exceed the 665,000 filings made during the worst week of the financial crisis. And the roughly 80 million claims made since the pandemic hit the US is more than double the 37 million filings seen during the previous downturn.

 

Labor-market indicators haven’t fared as well as some other economic data in recent weeks. Retail sales leaped 5.3% in January, according to Census Bureau data published last week, trouncing the 1% gain expected by economists. The data signals stimulus passed by President Donald Trump late last year efficiently lifted household spending during one of the worst months of the pandemic.

More recently, IHS Markit reported US business activity improved the most in almost six years in a preliminary February reading. The firm’s index of output across the service and manufacturing industries rose 0.1 point to 58.8, marking the strongest rate of growth since March 2015. The bulk of the improvement came from the service sector, while the manufacturing industry continued to expand at a relatively strong pace.

Pandemic data has similarly shown encouraging trends. Daily case counts are less than a third of their early January peak, and hospitalizations have also steadily declined. The US is administering 1.3 million vaccines per day on average and has so far administered 65 million doses, according to Bloomberg data.

The recovery is set to receive a boost from Washington in the coming weeks. House Democrats on Wednesday indicated they’ll hold a floor vote on President Joe Biden’s $1.9 trillion stimulus proposal on Friday. The legislation would then be sent to the Senate, where Democrats aim to pass the bill through budget reconciliation and send it to the president’s desk by March 12.

That timeline would allow for expanded unemployment benefits to continue instead of expiring on March 14. The package also includes $1,400 direct payments, aid for state and local governments, and an increase of the federal minimum wage to $15 an hour.

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US stocks dip as stimulus hopes waver and jobless claims hit 11-week high

Worried trader
  • US stocks edged lower on Thursday amid disappointing economic data and slowed stimulus progress.
  • New US weekly jobless claims jumped to an unadjusted 853,000 for the week that ended Saturday, handily exceeding the 725,000 estimate. The reading also marks the highest total in 11 weeks.
  • Democrats and Republicans remain at odds over a new fiscal relief package. The House voted Wednesday night to fund the government for an additional week and buy more time for stimulus negotiations.
  • The US Food and Drug Administration will evaluate Pfizer’s coronavirus vaccine on Thursday and vote on whether its benefits outweigh its risks for use in people at least 16 years old.
  • Watch major indexes update live here.

US stocks fell slightly on Thursday as jobless claims leaped to unexpected highs and Congress hit a new snag in stimulus negotiations.

New filings for unemployment benefits climbed to an unadjusted 853,000 for the week that ended Saturday, the Labor Department said Thursday. Economists surveyed by Bloomberg expected a reading of 725,000 claims. The jump places claims at their highest level in 11 weeks and marks a sharp reversal from the previous week’s revised total of 716,000.

Continuing claims, which track Americans receiving unemployment benefits, jumped to 5.8 million for the week that ended November 28. That similarly came in above economist forecasts and marked the first weekly increase since August.

Here’s where US indexes stood shortly after the 9:30 a.m. ET open on Thursday:

Read more: Cathie Wood is beating 99% of fund managers this year. The ARK CEO and her team share their outlooks for 2021 – including thoughts on Tesla’s $5 billion stock sale, the Salesforce-Slack tie-up, and bitcoin’s meteoric rise.

“The jump in weekly unemployment claims was partially due to a rebound from lower claims during Thanksgiving week, but the trend of more Americans losing jobs is clearly rising over the last month,” Robert Frick, corporate economist at Navy Federal Credit Union, said.

On the stimulus front, Democratic and Republican leaders remain at odds over key elements of their respective proposals. Senate Majority Leader Mitch McConnell offered a package that omitted pandemic-related liability protections for businesses and state and local government aid. House Speaker Nancy Pelosi balked at the proposal, and Senate Minority Leader Chuck Schumer emphasized the need for more state and local relief.

The House voted Wednesday night to fund the government for another week and buy extra time for stimulus talks.

Read more: We spoke to the top 5 European fund managers of 2020 to uncover their tips and tools for delivering stellar returns – and their star stock-picks for 2021

The tech-heavy Nasdaq composite underperformed peer indexes as Facebook slid lower. The social media giant fell after the US Federal Trade Commission filed lawsuits that could force Facebook to divest Instagram and WhatsApp.

The US Food and Drug Administration convened to evaluate Pfizer’s coronavirus vaccine. A panel will vote on Thursday on whether the benefits of the vaccine outweigh its risks for use in people at least 16 years old.

Airbnb is set to begin trading on Thursday after raising $3.5 billion in its initial public offering. The debut comes after DoorDash shares nearly doubled in the company’s first day of public trading.

Bitcoin fell to a 24-hour low of $18,021.45 before bouncing back above $18,100. The token has steadily trended lower after hitting record highs in early December.

Read more: Morgan Stanley is warning that the stock market’s economic recovery trade may soon be over. Here are 4 strategies they recommend for finding the returns that still exist.

Gold edged as much as 0.4% higher, to $1,847.75 per ounce. The US dollar weakened against a basket of Group-of-20 currencies and Treasury yields fell. 

Oil prices gained on vaccine hopes. West Texas Intermediate crude rose as much as 1.8%, to $46.33 per barrel. Brent crude, oil’s international benchmark, jumped 1.9%, to $49.77 per barrel, at intraday highs.

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