Dow Futures Slide, Dollar Extends Gains As Weekly Jobless Claims Jump to 870,000

The dollar continues its best run since June as investors adopt a cautious stance in the face of weakening economic data and worrying comments from President Donald Trump about the peaceful transition of power should he love the November election.

The Thursday Market Minute

  • Global stocks slide following last night’s sell-off on Wall Street as investors continue to focus on the economic impact of a coronavirus resurgence and the potential for U.S. electoral chaos.
  • President Donald Trump refuses to commit to a peaceful transition of power during a question-and-answer with reporters, suggesting election night controversies that could hammer stocks and disrupt world markets.
  • The U.S. dollar climbs to a near two-month high against its global peers as cautious traders position themselves into the final weeks before the November vote.
  • Oil prices slip lower after a bigger-than-expected drawdown in U.S. crude and data showing fuel demand is down nearly 10% from last year.
  • U.S. equity futures suggest a mixed open on Wall Street ahead of weekly jobless claims at 8:00 am Eastern time and Fed Chairman Jerome Powell’s third day of Congressional testimony, this time to the Senate Banking Committee, at 10:00 am Eastern time.

U.S. equity futures steadied Thursday, while the dollar extended gains to a near two-month high, as markets continue to focus on weakening economic growth, the lack of consensus on fresh fiscal stimulus and the potential for looming electoral chaos in November.

With coronavirus infections rising sharply in Europe, and trending well ahead of weekly averages in the United States, investors are worried that a lack of financial support from lawmakers in Washington could compound the weakness seen in consumer and employment markets over the final months of the year.

Weekly jobless claims data illustrated that, as the number of Americans filing for new unemployment benefits rose 4,000 to 870,000 over the week ending September 19, a figure that would take the cumulative total since March close to 62 million.

“We’re still in a deep hole, regardless of the comeback we’ve seen,” Cleveland Federal Reserve President Loretta Mester total an economic forum Wednesday. “We are recovering now, we see it, but it’s not broad based recovery yet and it’s not what I would call a sustainable recovery. I think it’s still fragile.”

Markets are also looking to the November Presidential elections, with Democratic candidate Joe Biden holding a consistent lead in the polls, and calculating the impact of a new administration in the White House.

However, investors were rattled overnight by comments from President Donald Trump, who continues to cast doubt — without citing evidence — on the legitimacy of mail-in ballots and the broader election result. Trump, in fact, refused to commit to a peaceful transition of power should he lose the election, telling reporters in Washington that “we’re going to have to see what happens.

“You know that I’ve been complaining very strongly about the ballots, and the ballots are a disaster,” he alleged. 

The comments, as well as last night’s stock sell off on Wall Street, triggered caution in overnight trading that lifted the U.S. dollar to a near two-month high of 94.52 against a basket of its global peers, while pushing commodity prices such as oil and gold notably lower.

U.S. equity futures look set for a weaker open following the jobless claims reading and another session of testimony from Federal Reserve Chairman Jerome Powell, who appears before the Senate Banking Committee in Washington at 10:00 am Eastern time.

Futures contracts tied to the Dow Jones Industrial Average suggest a 120 point decline following last night’s 525 point slump, with a 20 point pullback for the S&P 500 and a 140 decline for the Nasdaq. 

European stocks were also firmly in the red Thursday, even after a stronger-than-expected reading of German business confidence from the country’s Ifo Institute and a softer euro, which traded at a multi-month low of 1.1653 against the firmer greenback.

The Stoxx 600 benchmark was seen 0.7% lower in the opening hours of trading, while Britain’s FTSE 100 fell 0.5% and Germany’s DAX slipped 0.25%.

Global oil prices were also modestly lower, driven mostly by the stronger U.S. dollar and data from the Energy Department yesterday which showed a surprise 1.6 million decrease in domestic crude stocks and data indicating that U.S. fuel demand is down around 9% from the same period last year.

WTI contracts for October delivery, the U.S. benchmark, traded 30 cents lower from their Wednesday close in New York at $39.63 per barrel in early European dealing while Brent contracts for November, the global benchmark, were seen 29 cents lower at $41.48 per barrel.

Overnight in Asia, Japan’s Nikkei 225 slumped more than 1% to test the 23,000 point mark following the sell off on Wall Street last night, while the region-wide MSCI ex-Japan benchmark suffered it biggest one-day decline in nearly two months with a 2% paced by sharp declines in China, Hong Kong and South Korea.