Global stocks ticked down from 6-month highs on Thursday on concern over a stalled U.S. economic relief deal, while oil fell and the euro edged up against the U.S. dollar.
Treasury yields hit multi-week highs after record supply at a 30-year bond auction drew poor demand.
Initial claims for U.S. state unemployment benefits dipped below 1 million last week for the first time since mid-March, but the expiration at the end of July of a $600 weekly jobless supplement likely contributed to the decline.
Data showed the world’s largest economy regained only 9.3 million of the 22 million jobs lost between February and April. But Wall Street has recovered most equity market losses and the benchmark S&P 500 was within a few points of a record high.
“Our take on a new high, if it happens, is that it’s another reminder to investors how disconnected the stock market and the economy have been this year. Stocks have soared but the economy – it’s improved, yes – but a million initial claims is still not good,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
Canada’s main stock index fell on Thursday, weighed down by energy stocks as crude prices weakened.
The Toronto Stock Exchange’s S&P/TSX composite index was down 45.22 points, or 0.27%, at 16,530.06.
The energy sector dropped 1.6% as oil prices eased after the International Energy Agency lowered its 2020 oil demand forecast due to unprecedented travel restrictions to fight the coronavirus, but resilience in equities markets and a weak U.S. dollar limited losses.
Brent crude ended the session down 47 cents, or 1%, at $44.96 a barrel while West Texas Intermediate (WTI) settled down 43 cents, or 1%, at $42.24 a barrel.
The International Energy Agency cut its 2020 oil demand forecast and said reduced air travel due to the pandemic would lower global oil consumption this year by 8.1 million barrels per day (bpd).
The Organization of the Petroleum Exporting Countries (OPEC) said that world oil demand will fall by 9.06 million bpd this year, more deeply than the 8.95 million bpd decline expected a month ago.
“Overall, neither yesterday’s OPEC or today’s IEA release appeared to have much effect on an oil market that is still primarily focused on the ongoing expansion in risk appetite that remains undeterred by lack of progress in formulating a viable U.S. stimulus deal,” said Jim Ritterbusch of Ritterbusch and Associates.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 2.5%.
Spot gold added 1.7% to $1,951.06 an ounce. Silver gained 6.56% to $27.24.
The financial stocks slipped 0.7%, while utilities were down 0.8%.
The S&P 500 ended slightly lower on Thursday after briefly trading above its record closing high level for a second day, and the Dow also fell in the wake of a disappointing forecast from Cisco Systems Inc.
The S&P 500 during the session broke above its record high closing level of 3,386.15 from Feb. 19, just before investors sold shares in anticipation of what proved to be the biggest slump in the U.S. economy since the Great Depression. Its intraday record high of 3,393.52 was also set on Feb. 19.
A slump in Cisco Systems weighed on the Dow and S&P 500 after the company forecast first-quarter revenue and profit below estimates.
Concern about corporate outlooks has continued despite a mostly stronger-than-expected second-quarter earnings season.
“The outlook for earnings in the next few quarters seems to be getting watered down by a lot of big companies,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
“It’s making for a sluggish market without a real catalyst to push it up and over the hurdle for good,” he said.
Apple Inc rose, helping to support the Nasdaq and limiting losses in the S&P 500.
Also limiting bearishness, jobless claims fell below 1 million for the first time since efforts to curb the COVID-19 outbreak in the United States began five months ago.
Wall Street has recovered most of the trillions in market capitalization lost during the start of the pandemic and the Nasdaq was the first of the three major indexes to hit a record high in June. The Dow remains below its February peak.
Unofficially, the Dow Jones Industrial Average fell 80.12 points, or 0.29%, to 27,896.72, the S&P 500 lost 6.9 points, or 0.20%, to 3,373.45 and the Nasdaq Composite added 29.27 points, or 0.27%, to 11,041.51.
Initial claims for state unemployment benefits decreased to 963,000 for the week ended Aug. 8, the lowest level since mid-March. But the expiration of a $600 weekly jobless supplement at the end of July likely contributed to the decline.
Data last week showed the economy has regained only 9.3 million jobs of the 22 million jobs lost between February and April, indicating a long road to reach pre-pandemic levels.
Investors continue to hold on to hopes Democrats and the White House can reach agreement on a stimulus package to help the economy recover. Unemployment benefits have been a sticking point in their talks.
The U.S. presidential election is expected to add another layer of uncertainty into markets, with roughly 12 weeks remaining until Election Day.
The STOXX 600 suffered its first fall in five days after Washington said it would maintain 15% tariffs on planes and 25% tariffs on other European goods.
The pan-European index lost 0.63% and MSCI’s gauge of stocks across the globe shed 0.14%.
The 5-month global rally has caused MSCI’s world index to rise 50% from its March lows and reach within 2% of an all-time high.
In the currency and bond markets, faltering hopes for a compromise between Republicans and Democrats over additional stimulus for the U.S. economy dragged the dollar index down.
The greenback fell 0.049%, with the euro up 0.19% to $1.1804.
The Japanese yen weakened 0.03% versus the dollar to 106.95 per dollar, while Sterling was last trading at $1.3049, up 0.13% on the day.
A sell-off in benchmark government bond markets also eased, as investors digested the biggest-ever 10-year U.S. debt sale, and some surprisingly robust U.S. inflation figures.
U.S. Treasury yields rose to multi-week highs after the Treasury auction of a record amount of 30-year bonds.
Benchmark 10-year notes last fell 8/32 in price to yield 0.7126%, from 0.686% late on Wednesday.
The 30-year bond last fell 44/32 in price to yield 1.4224%, from 1.365%.
In Asia, Japanese stocks were the main mover, soaring 1.8% to a six-month peak on gains from chip firms.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.05% rose 0.11. Emerging market stocks rose 0.17%.
Reuters
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