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Market Takes A Hit As Weekly Jobless Claims Jump

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EDITOR NOTE: Much of the economic recovery we’ve seen over the last few months came from stimulus money pouring out of Washington. If the economy were beset by an “illness,” metaphorically speaking, the stimulus fund, no matter how much people needed, was still a mere band aid over a festering wound. Over a million jobs were lost last week, adding to the nearly 15 million unemployed numbers. The job loss rate far exceeds the recovery rate. It’s all about the virus. And to that, economic solutions are ineffective and fruitless, no matter how much money is poured into it.

Stocks traded lower on Thursday as concern about the economy grew among traders following the release of disappointing unemployment data and a dour economic outlook from the Federal Reserve. 

The Dow Jones Industrial Average dropped 77 points, or 0.3%. The S&P 500 slid 0.2%. The Nasdaq Composite outperformed, rising 0.3%.

U.S. weekly jobless claims totaled 1.106 million last week, the Labor Department reported. Economists polled by Dow Jones estimate that 923,000 first-time applicants filed for unemployment benefits during the week ended Aug. 15. In the week prior, the tally had dropped below 1 million for the first time since mid-March.

The jump in unemployment claims came as lawmakers struggled to move forward on a new coronavirus stimulus bill. Recently, an additional unemployment benefit for those impacted by the pandemic expired. 

“We can’t even be sure this recovery is sustainable as the economy got a huge boost from consumers’ wallets lined with $500 billion of stimulus from Washington from those $1,200 and $600 checks,” said Chris Rupkey, chief financial economist at MUFG. “That money is gone and with it the prospects for a lasting economic recovery where everyone on Main Street benefits. At the moment only stock market investors are riding high as the Federal Reserve’s money printing benefits Wall Street more than Main Street.”

However, continuing claims, which refer to those receiving unemployment benefits for at least two straight weeks, continued to decline. They fell by 636,000 to 14.844 million in the week ending Aug. 8. 

Thursday’s data release comes a day after the Federal Reserve released its July meeting minutes which said, “the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term.” 

The Fed’s comment knocked the S&P 500 from a new intraday record set on Wednesday. The benchmark closed at a new record high on Tuesday, confirming the start of a new bull market. The Dow and Nasdaq also turned negative after the minutes were released.

Wall Street also kept an eye on Washington amid lingering U.S.-China tensions. China’s commerce ministry announced early on Thursday that Washington and Beijing will be back around the negotiating table in the coming days.

Nvidia shares pulled back by 1.9% even after reporting blowout results. A better-than-expected 50% jump in revenue last quarter still wasn’t enough to lift the stock, which has doubled this year. Investors are growing concerned about valuations for high flying tech shares.

Intel shares gained 3.9% after the company announced an accelerated buyback plan, calling its stock cheap.

Originally posted on CNBC

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