| Thursday's Headlines 1. US markets mixed as tech stocks drag 2. ECB launches a new round of stimulus 3. US weekly jobless claims decline, but they remain sky high 4. Unemployment by race reveals massive inequality 5. Why Europe has a relatively low jobless rate Markets Closed
 Image courtesy MarcoSchmidt.net/Getty
Markets Today U.S. markets ended the day mixed as the DJIA rallied at the close with financial stocks continuing to lead the charge. Tech stocks sold off again in what has been a recent rotation, and they have a tendency of bringing the entire market up or down with them, as they did today with the S&P 500 and Nasdaq both losing ground. Airline stocks were in extreme rally mode as American Airlines increased the capacity of planes it plans to fly next month.
U.S. weekly jobless claims continue to decline week-over-week, but 1.9 million Americans filed for first-time unemployment claims in the week that ended yesterday. Continuing claims have been stubbornly high, which means rehiring is very slow.
The ECB launched a new stimulus program today, but it left interest rates unchanged. Unemployment has been more manageable in most European countries as the different approaches to stemming the crisis become more apparent.
Meanwhile, in Las Vegas, where casinos reopened at midnight...  Image courtesy David Becker/Stringer/Getty
Headlines:
 chart courtesy Compound Advisors
Weekly Jobless Claims Trend Lower Another 1.9 million Americans filed for first time unemployment insurance last week, the first week in ten with claims under 2 million. Continuing claims, those people out of work for several weeks, climbed to 21.5 million people, a 675,000 jump from last week. That's almost 15% of the working population, and nearly three times higher than any of the most recent recessions.
Tomorrow we'll get the May nonfarm payrolls report, which will likely tell us that the U.S. unemployment rate is at 19% or higher, the highest since the Great Depression.  Unemployment Wave Impacted Black Workers Most While job cuts hurt everyone, the degree of the layoffs has had a particularly hard impact on the black workforce. Even when unemployment was 3% just a few months ago, it was double that for black people in the workfoarce, who also earn, save, and invest less than other Americans. The rampant layoffs across industries, but particularly the service, administrative, and hospitality industries, where the largest percentage of black workers are employed, has led to more than half of that group out of work in the past three months, according to the Labor Dept.  Unemployment Is Uneven Globally While unemployment rates are high around the world, the U.S. rate is nearly triple that of Germany and Ireland. There are some obvious reasons for that, like much smaller working populations in those European countries.
But the federal response to the sudden recession has been handled very differently on either shore. In Europe, governments have directed much of their stimulus to paying companies to keep people employed. Most European countries tend to deploy wage guarantees and work-sharing programs, whereby the government helps subsidize employees who work reduced hours. There is unemployment insurance in some countries, but it is not as widely used as it is here.
The U.S. has relied on unemployment insurance since the Social Security Act was passed in 1935 and the public safety net was drawn. The CARES Act made PPP loans to businesses to keep workers on their payroll, but it wasn't that widely adopted.
The different approaches suit each country and its economy, but when you have an event like this with tens of millions of layoffs, the road back is much longer and more expensive.
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(chart courtesy YCHARTS)  Shares of airline stocks, including American (36.5%), United (over 14.5%), and Delta (over 13%), are up following surging demand as global quarantining begins to ease. Cruise line stocks, such as Norwegian (over 8.5%) and Carnival (over 7%), have risen on investor optimism over the industry soon returning to normal.  Shares of The Cooper Companies are down by 6% following Q2 revenue and earnings results that were significantly lower compared to the 2019 second-quarter. JM Smucker's stock price fell by nearly 4.5% as the food products manufacturer's surge in demand from self-quarantining consumers begins to dissipate. Word of the Day Ponzi SchemeA Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for early investors by acquiring new investors. This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers. Both Ponzi schemes and pyramid schemes eventually bottom out when the flood of new investors dries up and there isn't enough money to go around. At that point, the schemes unravel.  Ivan Boesky, 1987, Photo courtesy AP
Today in History June 4, 1987: The first big domino falls in Wall Street's insider-trading scandal as Kidder, Peabody & Co. pays a $25.3 million fine to settle Federal charges of securities fraud. The U.S. Securities and Exchange Commission claims that Kidder illegally "parked" stock for dealster Ivan Boesky, taking shares of Unocal off his hands temporarily to conceal his ownership and protect him from loss—and that Kidder takeover maven Martin Siegel had traded on inside information on at least six stocks.
The Wall Street Journal, June 5, 1987, p. A3.
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Thursday, June 4, 2020
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