North American main indexes opened lower on Thursday after data showed high levels of U.S. weekly jobless claims, while technology-related stocks resumed their slide with Apple Inc and Amazon.com Inc. among the biggest drags on the Nasdaq.
The Dow Jones Industrial Average fell 198.20 points, or 0.71%, at the open to 27,834.18. The S&P 500 opened lower by 38.63 points, or 1.14%, at 3,346.86. The Nasdaq Composite dropped 254.42 points, or 2.30%, to 10,796.05 at the opening bell. The S&P/TSX Composite Index opened up 145.31 points, or 0.89%, at 16,150.35.
The weakness in the tech sector has once again spilled over to Canada, with Shopify down 3.5% in earlier trading.
Some of the overall slide in markets is being attributed to the Federal Reserve’s actions and words on Wednesday, when the central bank indicated its benchmark interest rate will stay close to zero at least through 2023 but announced no additional stimulus plans.
While U.S. Treasury yields initially rose after the decision, they fell on Thursday and equities have been hit with another round of selling.
“It basically shows that it’s hard to please markets that are used to massive amounts of central bank action,” said DZ Bank rates strategist Christian Lenk. “I think that that really shows the big point is the Fed is going to stick to its... rate policy until the end of 2023.”
Markets “hoped for the Fed to put policy money where the mouth is” but “ended up a tad disappointed,” Mizuho Bank said in a report. The Fed was “long on talk and short on action.”
Also Thursday, the Japanese central bank left its interest rates unchanged and gave no sign of possible stimulus plans. And the Bank of England left interest rates unchanged and maintained its current level of asset purchases, but warned that the outlook for the economy remains “unusually uncertain.” The pound fell around 0.6% against the U.S. dollar and euro after the Bank of England said it had been briefed on how a negative interest rate could be implemented effectively, should it be needed.
Growing cases of the coronavirus in Europe is also contributing to a weak tone in European equities this morning, as are conflicting comments out of the United States as to when a vaccine may be widely available to the American public. Shares of stocks that would benefit most from a vaccine, including airlines and cruise line stocks, are among the leading decliners in premarket trade.
Meanwhile, case counts continue to rise in Canada, putting the recovery in the domestic economy at risk.
Weekly U.S. jobless claims data this morning came in at 860,000, very close to market expectations. A report on private sector employment in Canada today by ADP showed 205,400 job losses in August.
MSCI’s broadest index of Asia-Pacific shares outside Japan had lost 1% overnight after five straight days of gains while the tech-savvy Nikkei in Japan and KOPSI in South Korea shed 0.6%. and 1.2% respectively. The STOXX 600 index of European equities was down 0.7% ahead of the opening bells in North America.
Oil prices are slightly positive this morning, erasing earlier losses, while gold is down about 1% amid a higher U.S. dollar. The higher greenback is also pressuring copper prices.
U.S. energy companies were starting to return crews to offshore oil platforms in the Gulf of Mexico after Hurricane Sally halted operations for five days, shutting down output of nearly 500,000 barrels per day (bpd).
Currencies and bonds
The Canadian dollar is a touch weaker this morning, sticking to recent ranges, amid strength in the greenback and wobbly crude oil prices. Little has rattled the currency so far this week. “Domestic developments have had only a marginal impact on the CAD - it shrugged off the US’s aluminum tariff détente on Tuesday and seems unaffected by the recent increase in cases in Ontario that led to a reduction of social gathering limits; further restrictions could weigh on the CAD, however,” Scotiabank analysts said in a note. Canadian retail sales data for July on Friday may remind markets of the domestic economy’s solid rebound and help to support the currency, they said.
Other corporate news
Moderna Inc said on Thursday it will develop a seasonal flu vaccine as part of its increased investment in vaccines. The company also said it was actively preparing for a commercial launch of its potential COVID-19 vaccine.
Air Canada said it will make complimentary COVID-19 insurance coverage available to international travellers.
Carnival Corp. dropped 3.8% after its British cruiseline P&O Cruises extended a cancellation in sailings until early 2021. Other cruise operators such as Royal Caribbean Cruises and Norwegian Cruise Line Holdings Ltd shed about 2%.
The number of Americans applying for unemployment benefits fell last week to 860,000, a historically high figure that reflects economic damage from the coronavirus outbreak. Before the pandemic hit the economy, the number signing up for jobless aid had never exceeded 700,000 in a week, even in the depths of the 2007-2009 Great Recession. The Labor Department also said Thursday that 12.6 million are collecting traditional unemployment benefits, up from 1.7 million a year ago. The 860,000 in weekly claims was close to market expectations.
Employment in Canada decreased by 205,400 jobs from July to August according to the August ADP Canada National Employment Report.
U.S. housing construction fell a surprising 5.1% in August after three months of strong gains when home builders ramped up projects following a pandemic-induced shutdown in March and April. Applications for building permits dipped a slight 0.9% in August to a seasonally adjusted 1.47 million but that decline followed solid gains in the previous three months including a 17.9% rise in July. New homes were started at a seasonally adjusted annual pace of 1.42 million last month after a 17.9% surge in July, the Commerce Department reported Thursday. U.S. housing construction fell a surprising 5.1% in August after three months of strong gains when home builders ramped up projects following a pandemic-induced shutdown in March and April.
Applications for building permits, which is a good barometer of future activity, dipped a slight 0.9% in August to a seasonally adjusted 1.47 million but that decline followed solid gains in the previous three months including a 17.9% rise in July.
New homes were started at a seasonally adjusted annual pace of 1.42 million last month after a 17.9% surge in July, the Commerce Department reported Thursday.
With files from Reuters and The Associated Press