US close: Stocks head south ahead of Trump's conference on China
By Iain Gilbert
Date: Thursday 28 May 2020
(Sharecast News) - Major indices turned about-face on Thursday as a dire jobless claims report, weaker-than-expected gross domestic product numbers and Trump's announcement of a press conference all weighed on sentiment.
At the close, the Dow Jones Industrial Average was down 0.58% at 25,400.64, while the S&P 500 was 0.21% weaker at 3,029.73 and the Nasdaq Composite saw out the session 0.46% softer at 9,368.99.
The Dow closed 147.63 points lower on Thursday, reversing some of the gains recorded in the previous session as optimism regarding the reopening of the economy and a potential Covid-19 vaccine offset fears around a heightening of tensions between the world's two largest economies.
Thursday's primary focus was this week's weekly initial jobless claims report from the Labor Department which revealed that firings in the US had continued at a furious pace, albeit at a moderately slower pace, while hirings picked up for the first time since the pandemic.
According to the Department of Labor, the rate of initial unemployment claims fell by 323,000 over the week ending on 23 May to reach 2.123m - slightly higher than the 2.0m clip forecast by economists. So far, Covid-19 has claimed 40.7m jobs in the US since the outbreak hit in March.
Tech stocks were down at the close, weighing on the Nasdaq, as word broke that Donald Trump planned to issue an executive order against social media giants, escalating his war on Twitter.
A draft copy of the order will see the White House limit legal protections afforded to social media companies, making it easier for federal regulators to hold companies liable for limiting users' freedom of speech.
Facebook chief executive Mark Zuckerberg said social media networks should not be held accountable for what politicians using its platforms post.
"I don't think that Facebook or internet platforms, in general, should be arbiters of truth," Zuckerberg said. "Political speech is one of the most sensitive parts in a democracy, and people should be able to see what politicians say."
Heightened tensions between the US and China were also in focus again as China's National People's Congress endorsed a national security law for Hong Kong that will alter the territory's mini-constitution, straining relations between Beijing, Washington and Downing Street.
Wall Street's last-minute turnaround came as news broke that Donald Trump would be holding a press conference on China the next day amid increased rhetoric directed towards Beijing.
The US, Australia, Canada and the UK also issued a joint statement reiterating their "deep concern regarding Beijing's decision to impose a national security law on Hong Kong".
Elsewhere on the macro front, orders in the US for goods made to last more than three years fell sharply in April, with weakness especially evident in demand for transport equipment.
According to the Department of Commerce, in seasonally adjusted terms, total durable goods orders dropped at a month-on-month clip of 17.2% to reach $169.7bn. Economists had pencilled in a decline of 18.0%.
Also from Commerce, the economy contracted at a faster than initially expected pace during the first three months of 2020 - with economists expecting an even more dire outcome for the April-June quarter.
The Commerce Department revealed that gross domestic product had fallen at an annual rate of 5% in the first quarter, a bigger decline than the 4.8% drop first estimated a month ago and the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008 in the depths of the global financial crisis.
Lastly, US pending home sales surprised on the downside on Thursday, marking a second monthly decline in a row amid the Covid-19 pandemic. Pending home sales dropped 21.8% in April, according to the National Association of Realtors, the biggest decline on record and far and above forecasts of a 15% drop.
In Fed speak, New York Federal Reserve head John Williams said negative interest rates were not a tool that made sense for the central bank.
"We have other tools that I think are more effective and more powerful to stimulate the economy," said Williams.
Williams pointed to low interest rates, forward guidance and the central bank's balance sheet as tools it could deploy to aide the economy in returning to maximum employment.
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