Wall Street suffered sharpest daily decline in months
Stocks on Wall Street suffered their sharpest daily decline in months on Thursday as investors’ confidence was rattled by grim new economic forecasts, another 1.5 million weekly unemployment claims and a worrisome uptick in cases in parts of the United States.
As the bad news brought Wall Street’s recent rally to a halt, policymakers remained divided as to their next steps. The Labor Department reported Thursday that another 1.5 million U.S. workers had filed state unemployment claims last week, but Republicans and Democrats in Congress remained at odds over whether to extend federal jobless benefits.
Lawmakers in both parties and administration officials appear to agree that Congress should consider some form of assistance to workers as part of another round of coronavirus aid that is likely to be debated in the coming weeks.
Democrats want to extend federal weekly payments of $600 to supplement state unemployment benefits beyond July 31, when they are set to expire. But Republicans and the White House are resisting, citing a recent unexpected improvement in jobs numbers and arguing that extending the payments could discourage people from returning to work because, in some cases, the checks were more than what people were earning.
Here’s a look at what is going on with the U.S. economy:
Stocks on Wall Street retreated after a heady rally as investors considered grim economic forecasts and signs that the virus is not going away. The S&P 500 fell nearly 6 percent, the Dow Jones industrial average fell by more than 1,800 points and oil prices also cratered, reflecting the sudden unease that swept across financial markets.
The 1.5 million new state unemployment claims filed last week were the fewest since the crisis began, but still far above normal levels. A further 700,000 workers who were self-employed or otherwise ineligible for state jobless benefits filed new claims for Pandemic Unemployment Assistance, a federal aid program. The government reported that jobs rebounded last month and that the unemployment rate fell unexpectedly to 13.3 percent. But it later added a note to the report saying that the actual rate could be closer to 16.4 percent — still lower than in April, but higher than at any other point since the Great Depression.
The Federal Reserve and the Organization for Economic Cooperation and Development both issued grim economic projections on Wednesday and Thursday. Dr. Scott Gottlieb, a former commissioner of the Food and Drug Administration, warned that the first wave of virus cases was not yet over. “It’s not a second wave,” Dr. Gottlieb said in an interview with The New York Times columnist Andrew Ross Sorkin on the CNBC program “Squawk Box.” “They never really got rid of the first wave.”
Whether companies should be liable if their workers and customers contract the virus has become a key question as businesses seeking to reopen push Congress for temporary legal protections. Republicans support the idea, seeing it as key to getting the economy running again. But the proposal has created stiff opposition among congressional Democrats and labor unions, who say that such a shield would help companies that fail to take adequate steps to ensure safety.
A US hedge fund that has invested heavily betting on the failure of the struggling video game store chain GameStop has pulled out after an army of small investors sent its shares soaring and cost the financial firm a fortune. Melvin Capital Management, one of a number of Wall Street firms that stood to make money for investors if GameStop’s shares plummet, has told CNBC it has closed out its short position after taking a huge loss.
Tesla shares tumbled Tuesday, after Elon Musk’s electric vehicle maker was left out of the S&P 500 by the committee that decides on new additions to the index.
Stock markets have lost some of their spectacular gains made over the past several months, as investors sold off high-flying tech companies and worried about the continuing crisis in the US jobs market.
Wall Street and business groups are bracing for the possibility of a blue sweep in Washington that would leave Democrats in charge of the White House and both chambers of Congress.