- Dow Jones Industrial Average (DJIA) futures turned negative on Thursday morning.
- Coronavirus cases hit 5 million worldwide with a record 100,000 new daily cases.
- Focus shifts to Thursday’s jobless claims data which is expected to hit 39 million total claims since the crisis began.
The Dow Jones continues its volatile week with a heavy slide in premarket futures trading. Investors remain nervous as the global coronavirus pandemic shows no signs of slowing down.
The outbreak hit two devastating new milestones overnight:
- 5 million total worldwide cases.
- A record 100,000 new daily cases.
This thing is not slowing down. As a result, some analysts remain extremely cautious on the stock market. Despite a decent bounce from the March lows, Bill Maldonado at APAC says investors are still on the defensive.
I’m not sure I would be that positive about the sentiment… The rally has been very defensive in nature. A lot of defensive assets like gold have also done very well. Normally you wouldn’t expect that in a recovery rally.
Dow futures edge lower Thursday
Dow Jones Industrial Average (DJIA) futures slipped lower overnight. Source: Yahoo Finance
Coronavirus ravages on despite re-openings
The latest numbers are a sobering reminder that this pandemic isn’t over. On a global scale, it’s still accelerating. Even as cases plateau in the U.S., health experts are convinced it will flare up in the fall. Former FDA commissioner Scott Gottlieb explains:
This is going to come back in the Fall in some fashion, whether or not it comes back in an epidemic fashion is going to be dependent on what we do.
Global Macro Investor’s Remi Tetot shows how Covid-19 cases are trending upwards globally. Source: Twitter
Like a hurricane, the eye of the storm has passed over many different epicentres. Wuhan, Italy, and New York. But as some cities and states slowly re-open, the pandemic ravages on.
Stock market remains ‘defensive’
With an uncertain global backdrop, APAC’s Maldonado said the U.S. stock market is still playing defense.
Defensive sectors in equity markets have done extremely well.
The stock market rally has been held up by classic defence stocks like WalMart (NYSE: WMT), P&G (NYSE: PG), and Target (NYSE: TGT). And propelled higher by a new generation of defensive tech stocks: the giants of Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), and Apple (NASDAQ: AAPL).
Opportunity in the Dow Jones if you know where to look
While a majority of traditional investors are still on the sidelines, there are bargains to be found, according to Ming Lee, founder and chief executive officer at Caidao Capital. Speaking to Bloomberg, she said there was “a lot of opportunity in the market despite the pandemic.”
What we’re seeing right now is a real flight to quality and taking advantage of certain dips in the market… to buy high quality stocks at very favourable prices.
This is a phenomenon we’re seeing play out among retail investors and small traders. As a group, they are ‘buying the dip’ and opening up record levels of bullish options contracts. Others are less convinced, with dire warnings of another stock market correction on the horizon.
Stock market today: jobless claims in focus
All eyes are on this morning’s weekly jobless claims once again. We’re expecting another 2.35 million claims for a total of 39 million since the crisis began. That figure effectively wipes out the entire job gains since the 2008 recession.
The pace of new jobless claims is expected to ease off this week, but it remains in the millions. Source: Market Watch
As the number of weekly claims tapers off, focus will now switch to continuous claims. As the economy opens, many of the early job losses will return to the labor market. Continuous claims will therefore give a clearer picture of the economy.
This article was edited by Samburaj Das.