Stocks struggling to regain footing. After Wednesday’s losses and headlines dominated by COVID-19, it won’t be easy for stocks to regain their footing today. The Nasdaq is holding up better and near flat this morning after its eight-session win streak ended yesterday. Asian markets were mixed on light holiday volume, with Japan among the laggards as the Nikkei dipped 1.2%. European markets are holding up relatively well and are mixed in midday trading.
Jobless claims remain stubbornly high. Filings for initial jobless claims totaled 1.48 million for the week ending June 20, above Bloomberg’s consensus forecast of 1.32 million and down only marginally from the revised 1.54 million reported for the prior week. The continuing claims number, reported with a one-week lag, dipped from 20.5 million to 19.5 million. While fresh filings for unemployment claims have fallen 12 straight weeks from a peak near 7 million in late March, the gradual decline in recent weeks and still staggering number of unemployed point to a long road ahead for the US job market to fully recover from the pandemic.
Pessimistic forecasts from the IMF. We believe the International Monetary Fund’s (IMF) new forecasts may be overly pessimistic, particularly their expectation for a nearly 5% contraction in global gross domestic product (GDP) this year. However, we find comparing their forecasts across regions instructive: They point to the sharpest declines in Europe and Latin America, and some of the smallest declines in Asia, including potential positive growth in China. Pandemic containment is only part of the story, but these growth forecasts support our continued preference for Asia over Latin America and emerging markets over developed international.
Do collateralized loan obligations pose a systemic risk? We’re seeing more news articles about collateralized loan obligations (CLO) and whether the growing size of this market poses a systemic risk to the economy. CLO’s complex nature, and perhaps a little bit of scar tissue, draw comparisons to other complex securities from 2008. We take a closer look at the CLO market and whether they pose a risk to the broader market in today’s LPL Research blog.
COVID-19 news. New US cases jumped to about 38,500 on Wednesday, an increase of more than 60% over the prior week and one of the biggest daily increases of the crisis, according to the COVID-19 Tracking Project. New York, New Jersey, and Connecticut imposed quarantines for incoming travelers from hotspot states, while several states have paused re-openings, tightened social distancing restrictions, and added mask requirements. Hospital capacity is garnering increased attention (Source: COVID-19 Tracking Project).
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