Stock Market Drops On Stalled Stimulus and Jobless Claims

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Investors remain focused on the situation around the package of financial stimulus for the economy. So far, an agreement is still not possible. Steven Mnuchin noted that the positions of the parties diverge too much, and even if the incentives are agreed upon, it is unlikely that the support program will be implemented before the presidential elections. In addition, Fed Vice Chairman Richard Clarida said the US economy will need another year to return to pre-pandemic GDP levels. Published today, data on initial jobless claims turned out to be worse than the market expected. Instead of reduction, the indicator increased from 845K to 898K, but this data did not have significant pressure on the dollar.

Key Market Drivers Today:

  • Equities dive as stimulus hopes fade, virus cases rise, initial claims disappoint
  • Treasuries rally as risk aversion soars, bond yield falls below 1.50%
  • Initial claims jump 53k to 898k, but continuing claims drop -1,165k to 10,018k
  • Philly Fed index surged 17.3 points to 32.3 in Oct from 15.0 in Sep
  • Empire State manufacturing index fell -6.5 points to 10.5 in October
  • Export prices increased 0.6% in Sep, import prices rose 0.3%

U.S. regular initial jobless claims rose unexpectedly in the week ended 9th October. Claims rose to 898k. However, new claims under the PUA program dropped. The risk of the labor market’s rebound going into reverse was on full display with the latest jobless claims report. Initial filings for regular state programs rose above expectations to 898k.

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The rise in claims comes in spite of estimates for California, the most populous state, being held at the level prior to when the state paused filings in mid-September. Meanwhile, continuing claims dropped 1.2 million in the week ended 3 October, but the fall likely reflects more workers exhausting benefits. Over the prior week, recipients of the PEUC program, which provides an additional 13 weeks of benefits, rose 818k.

The number of benefit recipients throughout all programs dropped a bit in the week of 26th September, but at 25.3 million it illustrates the wide degree of stress that remains within the labour market, said Wells Fargo in a research report.

Oil quotes are correcting down today. A significant drop in prices is associated with tougher economic restrictions in France and Germany, which risk putting additional pressure on energy demand. The situation could not be improved even by the positive data from the API report, which recorded a decrease in oil reserves in the United States by 5.422 million barrels. In the evening, investors are waiting for the EIA report. Stocks are expected to decline by 2.835 million barrels. The realization of the forecast could slow down the price decline.

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