Dow Jones back below 26,000 after jobless claims data

On Thursday the Dow Jones Industrial Average sank 1.4%, closing below 26,000 points after weekly jobless claims data was released. The number of Americans who filed initial claims for unemployment benefits fell 99,000 to 1.31 million for the week ended July 4. That was the 14th weekly decline in a row, and the figure was lower than anticipated. However, a further one million people filed for Pandemic Unemployment Assistance, a federal programme for self-employed workers, and around a fifth of the US workforce is now receiving some type of unemployment benefit. The gravity of that situation, and the first signs that the death rate is going to pick up along with the surge in coronavirus cases in many states, tempered investor sentiment.

Investors were also met with dire quarterly earnings news from homeware retailer Bed, Bath & Beyond. The company’s share price sank by 25% after reporting a loss of $1.96 per share from revenues of $1.31. That revenue figure is half of what it was for the same period a year earlier and while digital sales jumped 82%, sales from stores sank by 77%. Bed, Bath & Beyond also announced this week that it is closing 200 stores permanently, a decision it expects to save the company $250m to $350m in costs annually.

Elon Musk gloats as Tesla keeps pressing higher

While the S&P 500 and Dow Jones Industrial Average fell back on Thursday, the Nasdaq Composite continued to charge ahead, buoyed by gains from chip stocks. Advanced Micro Devices, Microchip Technology and Nvidia all finished higher, up 7.2%, 3.4% and 2.9% respectively. Tesla also provided a boost, adding 2.1% to its share price; the company’s market cap is now north of $250bn. Elon Musk, CEO of the electric car maker, has been gloating this week after he announced the launch of a Tesla Short Shorts clothing item, intended to mock the bevy of short sellers who have bet against his firm. In other headlines, $5bn market cap flooring company Mohawk Industries sank by 20% after Wall Street analysts offered their views on a lawsuit from a Mississippi public retirement system that claims the firm committed accounting fraud. In the Dow Jones Industrial Average, only five stocks were in the green on Thursday. Walgreens Boots – the owner of Boots in the UK – found itself at the back of the pack, sinking 7.8%, after quarterly earnings showed that sales grew but the pandemic was a severe detractor on profits.

S&P 500: -0.6% Thursday, -2.4% YTD

Dow Jones Industrial Average: -1.4% Thursday, -9.9% YTD

Nasdaq Composite: +0.5% Thursday, +17.6% YTD

Rolls Royce drags FTSE lower after announcing huge cash burn

The FTSE 100 dropped 1.7% on Thursday, taking it back to a near 20% loss year-to-date. One stock driving the index down was Rolls-Royce, which said on Thursday that it has burned through three billion pounds in cash over the past six months due to the pandemic, with CEO Warren Easton warning the “historic shock in civil aviation” will take “several years” to recover from. The firm also said that 3,000 workers in the UK had applied for voluntary redundancy, part of a larger plan to cut 9,000 jobs from a staff of 52,000. National Grid and SSE both suffered 4% plus falls on Thursday too, after energy regulator Ofgem proposed a halving of the returns that large energy firms are allowed to make for running the UK’s energy networks. From 2021, Ofgem plans to set a baseline rate of return for energy network firms at 3.95%, versus the 7-8% figure under the current rules. In the FTSE 250, which sank 1.2% on Thursday, property developer Hammerson was the biggest loser, closing out the day 9.2% lower. Hammerson’s share price is now down by 75% year-to-date, pushing its dividend yield past 14% and its price-to-earnings ratio into the very low single digits.

FTSE 100: -1.7% Thursday, -19.8% YTD

FTSE 250: -1.2% Thursday, -22.4% YTD

What to watch

Producer price index: PPI data for June will be released on Friday in the US by the Bureau of Labor Statistics. The data measures the average change over time in the prices received by US producers for the products and services they provide. Month-over-month and year-over-year data will be released, with economists anticipating an increase versus May but a drop compared to June 2019. PPI provides a different perspective on inflation to the consumer price index, as it shows the cost of goods and services from the perspective of the industries that produce them, rather than consumers. The index is often used to underpin long-term contracts to supply goods, such as components for manufacturing.

Presidential election: Thursday was a significant day in the race for the presidency. The US Supreme Court ruled that the President’s financial records and tax returns could be accessed by New York prosecutors, but crucially in another ruling the court put a temporary block on a similar request from Congress. What that means is the public release of his tax returns may not happen between now and the election, per the FT, potentially helping avoid another major public controversy. Trump has already taken to social media to vent his frustration at the ruling, claiming he is being harassed – despite his own two nominees to the Supreme Court siding against him. Investors are paying close attention to the presidential race, as Trump and Biden represent two very different outcomes for corporate tax rates and regulation.

Crypto corner: Is Bitcoin price tracking the S&P 500?

New statistics suggest the correlation between Bitcoin and the S&P 500 US equity index are approaching all-time highs.

Between March and May this year, and again in mid-June to now, the correlation between the way the cryptoasset and the US’ key index trade has moved close to a score of 1, which represents a perfect correlation.

One analyst told Bitcoinist that the two now have a correlation of 0.95. Bitcoin has recovered broadly in line with the S&P 500 from the lows seen in March, but neither has been able to revisit previous highs seen earlier this year.

All data, figures & charts are valid as of 10/07/2020. All trading carries risk. Only risk capital you can afford to lose