Dow rallies 300 points, rebounding from selloff
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U.S. stocks staged a comeback in the final hour of trading Thursday, propelled by bank shares as investors weighed the prospects for an economic turnaround following a sharp sell-off a day earlier.
Stocks came under pressure in early trading following a surge in new coronavirus cases and another wave of job layoffs, but turned higher in the afternoon after the Federal Reserve and other regulators loosened some financial regulations for banks.
Financial stocks surged after the Fed and four regulatory agencies announced they were going to change a rule that has limited banks’ ability to make investments in such areas as hedge funds. The rule change could free up billions of dollars in capital in the banking industry.
The Dow Jones industrial average jumped 299.66 points, or 1.2%, to close at 25,745.60, after slumping as much as 236 points following the opening bell. Another bout of volatility continued for a second day after the blue-chip average tumbled more than 700 points Wednesday on fears of a slower-than-expected economic recovery from the pandemic.
The Standard & Poor’s 500 rose 1.1% to end at 3,083.76, recouping early losses as a rise in shares of financial firms kept declines in check elsewhere. Shares of JPMorgan Chase, Wells Fargo and Goldman Sachs rallied at least 3% apiece.
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Stocks flipped between gains and losses during most of Thursday as the number of Americans seeking jobless benefits remains high, dimming hopes for a relatively quick economic turnaround from the pandemic.
About 1.5 million workers filed first time claims for unemployment insurance last week, the Labor Department said Thursday, with a staggering 47.1 million Americans making initial jobless benefits claims in just 14 weeks. This marked the 14th consecutive week that filings remained above 1 million.
"While recent economic indicators like the May jobs report stoked optimism for a swift recovery earlier this month, the slow improvement in continuing claims puts a damper on those high hopes," Daniel Zhao, senior economist at Glassdoor, said in a note.
To be sure, there were signs of gradual improvement in the labor market. The total number of Americans receiving benefits, for instance, continued to fall, declining by 767,000 to 19.5 million.
“The marginal improvement in the labor market is a positive sign we’re on the road to recovery, but the increasing claims states where virus cases are up proves there will be bumps along the way,” Charlie Ripley, senior investment strategist at Allianz Investment Management, said in a note.
The mixed data come amid growing alarm over a surge in cases of COVID-19. Hospitalizations and caseloads have hit new highs in over a half-dozen U.S. states, including California, Florida and Texas. New cases nationwide are back near their peak level of two months ago.
The 34,700 COVID-19 cases reported Tuesday returned the U.S. to near its late April peak of 36,400 new cases in one day, according to a count kept by Johns Hopkins University. The virus has been blamed for over 120,000 U.S. deaths — the highest toll in the world — and more than 2.3 million confirmed infections nationwide.
Despite shedding its gains for June, the S&P 500 index is still on pace for its best quarter since the fourth quarter of 1998. The market had been mostly in rally mode since April as investors focused on the prospects for an economic turnaround as broad areas of the economy reopened. But the recent surge in new infections has undercut that optimism.
“Following a strong first phase of recovery, the economy appears to be entering the slower, second phase of recovery,” Gregory Daco, chief U.S. economist of Oxford Economics, said in a note. “Looking ahead, we stress that the foundation to this recovery is an improving health outlook. If that measure continues to deteriorate, confidence will follow suit.”
Bond yields fell. The yield on the 10-year Treasury note held at 68%. The yield tends to move with investors’ expectations for the economy and inflation.
In energy trading, benchmark U.S. crude oil rose 1.9% to settle at $38.72 a barrel. Brent crude, the international standard, gained 1.8% to $41.05 a barrel.
After broad losses in Asia, markets were somewhat more stable in Europe. London’s FTSE gave up 0.4%, while Germany’s DAX rose 0.7%. The CAC 40 in Paris picked up 1%. In Asia, Tokyo’s Nikkei 225 slipped 1.2% and the Kospi in Seoul lost 2.3%. India’s Sensex lost 0.8%. Markets in Hong Kong, Taiwan and Shanghai were closed for holidays.
Contributing: The Associated Press