Dow Futures Sink Fearing Modern America’s Worst-Ever Unemployment Crisis

  • Dow Jones Industrial Average (DJIA) futures tumbled in premarket trading Thursday.
  • Traders nervously await the worst unemployment report in history, with Goldman Sachs predicting 3.1 million claims.
  • Analysts say this is just the start as the dominos begin to fall across America.

Investors are anxiously awaiting the worst unemployment report in America’s history. Morgan Stanley estimates the number will top 3.1 million jobless claims on Thursday, pushing Dow Jones Industrial Average (DJIA) futures down overnight.

Whatever number comes up today, analysts say the worst is yet to come for the U.S. stock markets. Speaking to CNBC, RBC Capital Markets’ Lori Calvasina said she’s looking for the S&P 500 to fall back to at least 2,000 – a drop of 20% from here.

I think there’s a good chance that [Monday] probably wasn’t [the bottom]. What we know about bottoms is that they do take time … The market was starting to tell us that something more onerous than an ordinary recession is at hand. And I think that possibility is still out there.

Morgan Stanley’s Lisa Shalett agreed:

I don’t think we’re ready to declare a bottom either.

Dow futures crumble

After two days in the green, the U.S. stock markets looks set to reverse on Thursday. Dow futures contracts were down 1.4% in the premarket session, despite the $2 trillion rescue package finally making its way through the Senate.

Dow Jones Industrial Average (DJIA) futures plunged overnight ahead of Thursday’s crucial jobless claims report. Source: Yahoo Finance

S&P 500 futures and Nasdaq Composite futures were down 1.78% and 1.6% respectively.

California: 1 million unemployed

If the numbers out of California last night are anything to go by, the jobless claims will be even worse than expected. The state reported over 1 million unemployment claims last night, a shocking rise from just 50,000 in December.

Nationwide estimates suggest a figure between 3 and 4 million.

We’re coming up with a number that could be over 3 million and perhaps as high as 3.4 million – Ron Temple, Lazard Asset Management, NY.

Morgan Stanley estimates 3.1 million jobless claims on Thursday – dwarfing any weekly number in recent recessions. Source: Morgan Stanley

Workers have lost their jobs across all sectors of society from the service industry to travel to the self-employed. This is the beginning of a longer recession and investors are reluctant to go back in the water. Temple continues:

That kind of magnitude of an increase in unemployment and shock to the system, it’s way too early to be trying to call a bottom or prognosticate how much further (the market) could go down.

The Dow Jones probably hasn’t bottomed yet

Thursday jobless claims is the first indicator of the U.S. economy retracting. And analysts say it’s just the beginning. Mohannad Aama at Beam Capital Management said firms are restructuring and downsizing across the country:

Any number we get on Thursday won’t give an accurate picture of what is going on out there with downsizing decisions being discussed in corporate America as we speak.

With gut-wrenching jobless claims on the way and more coronavirus headlines, Wall Street is bracing for another bloodbath on the markets.

Coronavirus impact will get worse before it gets better

The news cycle is expected to get worse as America becomes the global hotspot for the novel coronavirus. Investors say they won’t get fully back into the market until there’s an end in sight. Tarek Fadlallah at Nomura Asset Management told CNBC:

I wouldn’t be rushing straight back in at these levels … The news flow in the next two weeks will get worse, especially as we see the infection rates increase in the US and Europe. Once we start to see an improvement in those numbers … Once I see the news flow improving and I can see an end to this situation, then whatever the level is, you have a look at that and make a decision.

Jobless claims will be revealed at 8.30 am ET on Thursday.

This article was edited by Samburaj Das.

Last modified: March 26, 2020 11:54 AM UTC

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