| Thursday's Headlines 1. US markets rally in the face of weekly jobless claims 2. Uber posts $2.9 billion loss 3. UK braces for steepest decline since 1706 4. Fed futures indicate negative interest rates in 2021 5. How expensive is the stock market right now? Markets Closed
 Image credit: David Merron Photography/Getty
Markets Today U.S. markets staged a broad-based rally today with all sectors in the green in the face of increasingly bad economic news. U.S. weekly jobless claims approached 3.2 million, bringing the seven-week total to more than 33 million Americans suddenly out of work. The Bank of England forecast the U.K. economy to crash 7.8% this year, the most since 1706. No big deal. Still, risk assets continue to rise as the hopes of an economic recovery remain alive.
Oil prices were on the rise again, and they are on pace for 25% gains this week, which would be historic. Meanwhile, in the world of interest rates, the U.S. Federal Funds Rate futures (the rate banks use to base their loans to one another) hit a key level, implying negative interest rates in early 2021 (more below).
That's never happened.
Another major legacy retailer threw in the towel as Neiman-Marcus filed for bankruptcy. That business was over a century old. Meanwhile, the Nasdaq is positive for the year.
P.S. Is this the future of dining out? This is what Amsterdam is trying.
courtesy BloombergQ/T  (If you are a podcast listener, I had the privilege of joining Roben Farzad on "Full Disclosure" on NPR, recently. It's a good conversation about the markets, the economy, and some backstory on Investopedia and yours truly.)
Headlines:
 Weekly Jobless Claims Take Toll on States Another week, another several million Americans filing for first-time unemployment claims as more companies lay off workers in the face of an uncertain economy.
The unemployment rate is set to surge to 15% or more when the April jobs report comes out tomorrow morning. But that doesn't come close to the damage the layoffs are doing to individual states. States rely on tax payroll revenue among other sources of funding, and that is drying up.
The state with the highest unemployment claims is California, which also has the most people, with 318,000 claims. That state just borrowed $348 million from the federal government, and it has a credit line of up to $10 billion.
Texas reported 247,000, down from 254,000 in the previous week. Georgia had an estimated 227,000 and New York reported 195,000. Florida, which had the highest number of claims in the prior week, reported 173,000 in the week ending May 2nd, down considerably from 433,000.  Fed Funds Rate Futures Imply Negative U.S. Interest Rates The Federal Reserve has been pretty explicit that it will not resort to negative interest rates in the U.S. to stem the economic crisis. So when federal funds rate futures (the rate that banks base their loans off of to lend to one another) started pricing in a negative fed funds rate in 2021, many investors were scratching their heads today.
The Fed has been propping up the federal funds rate through its purchases in the repo market (the overnight lending market banks use to loan to one another). The Fed has promised to keep doing that with hundreds of billions of dollars for as long as it takes. So why would future rates go below zero?
The perception may just be that investors feel like the economy won't rebound as quickly as many might be hoping, and the Fed may have to pull this last ace out of its sleeve to keep the economy from seizing up.
The consequences, however, would be severe, given the trillions of dollars in U.S. government bonds held by investors all over the world—especially by other countries.  chart courtesy Yardeni Associates
How Expensive Are U.S. Stocks? With the S&P 500 climbing 28% since the lows of March 23rd, the drumbeat is growing louder that stocks may be overvalued. The giant tech stocks like Amazon (AMZN) and Netflix (NFLX) have seen their valuations soar as they hit record highs. But it's not just tech stocks that are driving the forward price to earnings ratio of the entire market. The forward price to earnings ratios (projected earnings of a company in the future) for the real estate and energy sectors have also soared in recent days as stocks in those groups have come off their recent lows.
What's curious about this is that, while their stock prices have risen, there is not a lot of visibility about what their earnings will be in the future.
In other words, there is no E below the P in P/E.
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(chart courtesy YCHARTS)  Shares of Fortinet are up by 21% after the cybersecurity company posted strong Q1 results due to a boost in sales from the stay-at-home market. Similarly, Lincoln National's stock price rose 16% amid the insurance and asset management company's first-quarter EPS results beating estimates.  Although Welltower's Q1 FFO results managed to beat estimates, Welltower's stock fell 7% as the company slashed its dividend by 30%. Similarly, while HollyFrontier's first-quarter net income surpassed the Zacks Consensus Estimate, the petroleum refiner's stock price fell by over 5% due to Q1 revenue results that ultimately fell short. Word of the Day Federal Funds RateThe federal funds rate refers to the interest rate that banks charge other banks for lending them excess cash from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall.  photo courtesy Sony Archives
Today in History May 7th, 1946: Akio Morita and Masaru Ibuka co-found Tokyo Tsushin Kogyo, or Tokyo Telecommunications Engineering Corp. to "bring radio communications and similar devices into common households and to promote the use of home electric appliances." One such appliance the founders imagine: "a device which prints the contents of a newspaper that it receives over the radio." Morita and Ibuka later rename their company Sony Corp.
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Thursday, May 7, 2020
Life Below Zero
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