Stocks drop as investors weigh record private-sector job losses in April

Stocks drop as investors weigh record private-sector job losses in April

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USA TODAY

U.S. stocks snapped two consecutive days of gains Wednesday as hopes for an economic recovery were tempered following a historically weak report on U.S. payrolls.

The Dow Jones industrial average dropped 218.45 points to close at 23,664.64. The Standard & Poor’s 500 fell 0.7% to end at 2,848.42, as gains in technology shares were offset by declines in energy and financial shares.

Private-sector companies shed a record 20.2 million jobs in April, according to payrolls processor ADP, as businesses were forced to shutter following a shutdown to slow the spread of the deadly coronavirus. That marked the worst decline in the survey’s history.

The data comes ahead of Friday’s closely-watched jobs report for April from the Labor Department. 

“April was nothing short of disastrous for the job market,” Ken Berman, strategist at investment advice platform Gorilla Trades, said in a note.

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Investors are monitoring shares of small-capitalization companies for further clues on the direction of the economy. Those stocks are typically more closely tied to the domestic economy than their larger counterparts. Small caps, along with financial firms, have shown signs of weakness recently, signaling investors remain “wary of the outlook for the global economy,” Berman says.

Investors are also monitoring financial shares because bank stocks are perceived to reflect the health of the broader U.S. economy. On Wednesday, shares of JPMorgan Chase, Wells Fargo and Morgan Stanley fell at least 1.8% apiece.  

Investors have been optimistic recently as some countries and U.S. states allow businesses to reopen despite warnings virus infections still are rising in areas. Texas and South Carolina have allowed restaurants and some other businesses to reopen. California might allow some retailers to resume serving customers this week.

The S&P 500 has recovered more than half its losses in a sell-off earlier in the year. To be sure, some analysts are skeptical about the recent rally in stocks. They say it is overdone given uncertainty about how long the recession will last.

“We expect stocks to remain volatile as markets struggle to find a balance between announcements on the lifting of lockdowns, data on potential treatments and vaccines, economic releases, news on the course of the pandemic and changing political dynamics,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note. 

Energy stocks were also down after oil prices gave up some of their gains from earlier in the week.

Benchmark U.S. crude oil fell 57 cents, or 2.3%, to settle at $23.99 a barrel Wednesday. Brent crude oil, the international standard, fell $1.25, or 4% to $29.72 a barrel. That helped drag Chevron down 3.1% and Exxon Mobil down 1.9%.

Disney shares dipped 0.2% after the company said earnings in the latest quarter tumbled by more than 90% after the pandemic wiped out $1 billion in theme-park sales. The Dow component’s stock has shed about 30% this year.

Shares of CVS Health fell 1.3% despite reporting a surge in profits, as people rushed to fill medicine cabinets and pantries ahead of the arrival of the coronavirus. 

In Europe, London’s FTSE 100 gained 0.07%. The DAX in Frankfurt fell 1.2% and France’s CAC 40 lost 1.1% after the European Commission said it expects the economy of the 19-country eurozone to shrink 7.75% this year, a recession of “historic proportions.”

In Asia, the Shanghai Composite Index climbed 0.3% and Hong Kong’s Hang Seng added 1.1%. The Kospi in Seoul was 1.8% higher and India’s Sensex gained 0.7%. Sydney’s S&P-ASX 200 lost 0.4%. 

Contributing: The Associated Press

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