U.S. Stocks Show Substantial Turnaround After Seeing Early Weakness


After falling sharply early in the session, stocks have shown a significant turnaround over the course of the trading day on Thursday. The major averages have bounced well off their lows of the session and into positive territory.

In recent trading, the major averages have seen further upside, reaching new highs for the session. The Dow is up 240.59 points or 1 percent at 23,488.56, the Nasdaq is up 13.43 points or 0.2 percent at 8,876.60 and the S&P 500 is up 17.39 points or 0.6 percent at 2,837.39.

Banking stocks have helped to lead the rebound on Wall Street, with the KBW Bank Index surging up by 3.4 percent after falling as much as 3.8 percent in early trading.

The recovery by banking stocks may be partly due to bargain hunting, as traders pick up the stocks at reduced levels after the index hit its lowest intraday level in well over a month.

Substantial strength has also emerged among oil stocks, driving the NYSE Arca Oil Index up by 1.3 percent following an early move to the downside.

Oil stocks are moving higher along with the price of crude oil, with crude for June delivery jumping $1.60 to $26.89 a barrel.

A sharp increase by the price of gold has also contributed to significant strength among gold stocks, which are moving higher along with brokerage, steel, and housing stocks.

The early sell-off on Wall Street reflected renewed concerns about the economic outlook after Federal Reserve Chair Jerome Powell warned of “significant downside risks” during a speech on Wednesday.

Powell’s comments have offset the optimism about a quick economic recovery that helped to drive stocks well off their March lows.

A number of economists have previously warned that the economy is not likely to see a V-shaped recovery, but the comments from Powell seem to have hit home with investors.

Adding to the negative sentiment, the Labor Department released a report showing a much smaller than expected decrease in first-time claims for unemployment benefits in the week ended May 9th.

The report said initial jobless claims fell to 2.981 million, a decrease of 195,000 from the previous week’s revised level of 3.176 million.

However, economists had expected jobless claims to tumble to 2.5 million from the 3.169 million originally reported for the previous week.

Jobless claims have steadily decreased since reaching a record high of 6.867 million in late March, but the number of new claims has reached nearly 36.5 million since the coronavirus-induced economic shutdown.

“While initial claims for unemployment benefits continue to retreat from their peak, they remain at levels consistent with a labor market in distress,” said a note from economists at Oxford Economics.

They added, “And the headline figures don’t tell the full story since they don’t capture individuals receiving benefits under state and emergency programs.”

A separate report released by the Labor Department showed steep drops in both import and export prices in the U.S. in the month of April.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index plummeted by 1.7 percent, while China’s Shanghai Composite Index slid by 1 percent.

The major European markets also showed significant moves to the downside. While the U.K.’s FTSE 100 Index plunged by 2.8 percent, the German DAX Index tumbled by 2 percent and the French CAC 40 Index slumped by 1.7 percent.

In the bond market, treasuries are extending the upward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.2 basis points at 0.617 percent.

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