Tech and consumer equities lead the charge downwards as fears that the recovery has stalled in the US emerges. The NASDAQ is down 2.33% today, with the SP500 and Dow Jones down 0.66% and 0.7%. Priced-to-perfection tech stocks, even with better than expected earnings was not able to defend the lofty prices from the risk-off rush out of the market.
Fears that the US economy has stalled comes on the back of an unexpected rise in Jobless claims in the past week. Unemployment claims rose by an adjusted 109,000 to 1.4 Million, with analysts expecting 1.3 Million. However, unemployment in the US has decreased in the past couple of weeks as workers are rehired as the economy opens. However, as the US continues to grapple with the Coronavirus, many states have slowed reopening and therefore slowed rehiring.
The potential stall of the economy comes at an unwanted time, as the $2 Trillion stimulus package is nearing the end of its course. Currently, Congress is trying to negotiate another trillion-dollar package as the Coronavirus continues to ravages the United States. However, some people believe that the $600 weekly government payment has disincentivized people to go back to work, skewing the numbers. University of Michigan Labor economist Don Grimes stated that “the $600 additional weekly payment may have encouraged people to stay on unemployment..”
It is interesting to note the performance of specific markets around the world:
All major American, Australian, and European Indexes are down due to Coronavirus concerns – While the NZX 50 and the KOSPI, New Zealand’s and Korea’s major stock indexes respectively, are up for the week. Furthermore, It may be interpreted as the cogs in the markets are turning back to normal, slowly pricing in risk correctly. Furthermore, we can also see this in the Oil and Gold spot market, with Gold rallying admits Oil ranging, as the Oil demand fluctuates around the world. However, the Dollar index declined with treasuries rising, showing that the initial rush to hoard the dollar is slowly evaporating. Generally, this is a good thing for investors as it means rationality in the markets is gradually coming back.
Anish Lal did some great technical analysis on Gold - Will it reach $5,000?