Stocks Rise Modestly After a New Low in Jobless Claims

28 May 2021 · 3rd Party Analysis

Stocks Rise Modestly After a New Low in Jobless Claims


In Summary

  • Stocks advanced on Thursday, futures tick higher in pre-market hours on Friday
  • Positive jobless claims data and GDP growth increase investor confidence

The US equity market pushed higher on Thursday after jobless claims fell to a new low since the pandemic began in March 2020. In another sign of a healing economy and an accelerating recovery, data from the Labor Department showed worker filings for unemployment benefits reached a new pandemic low, falling to 406,000 from 444,000 the previous week.

The decline was more than analysts expected and served as proof to reassure market participants the economic recovery remains on track and moving higher. The 4-week moving average for seasonally adjusted initial claims extended a steady downtrend and reached 458,750, a decrease of 46,000 from the previous week. The latest number for the average is the lowest since mid-March 2020 when it was 225,000. Adding to the positive economic environment, US gross domestic product rose in the first quarter to 6.4%, unrevised from the preliminary estimate. Data from the Commerce Department showed consumer spending was revised up to an annual rate of 11.3% for the period January through March this year. Consumer spending is regarded as the primary driver of economic growth and has been crucial in the context of the reopening of the US economy.

Combined, both data sets point that the labor market is gaining upside momentum as the coronavirus effect is receding across the states and the economy is swiftly coming back to life. Still, US employment needs to add 8 million more jobs to the economy to get to pre-pandemic levels.

Fed Reiterates Commitment to Easy-Money Policies

Major indexes have stabilized after inflation-induced jitters and are looking to end the week with gains. The Dow Jones Industrial Average on Thursday rose 141.59 points, or 0.41%, to 34,464.64. The S&P500 advanced 4.89 points, or 0.12%, to end the session at 4,200.88. The Nasdaq Composite finished the session virtually unchanged, but below the flatline, down 1.72 points, or 0.01%, at 13,736.28.

Traders and investors have been growing increasingly comfortable with the notion that the Federal Reserve is in control of the economic development and the flow of money in the system. The central bank has committed to maintaining its supportive monetary policy actions despite the “transitory” market environment, defined by higher inflation.

Fed officials this week have commented that the central bank does not intend to scale back easy-money policies. Moreover, they reassured there are no plans for imminent changes to the current approach to the economy.

US stock futures on Friday are poised to continue the upside momentum. All three benchmarks are higher in pre-market trading with Dow futures leading the pack, up about 0.40%. Futures contracts tied to the S&P500 are higher by roughly 0.20% and Nasdaq futures are up less than 0.1%.

Investors are also monitoring the latest developments in the negotiations in Washington. The talks over the infrastructure spending narrowed the gap yesterday when Senate Republicans presented a $928bn

plan to the White House. The Biden administration has proposed a $1.7tn package, down $600bn from the original $2.3tn spending on infrastructure. Both sides have expressed a strong desire to reach a bipartisan agreement to sustain economic growth.

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