Searching For Unemployment

By Nicholas Jasinski |  Wednesday, March 25

Back-to-Back. The impending passage of a $2 trillion economic-rescue bill lifted stocks for a second day today, but not without throwing a last-minute wrench into the gears. Congressional leaders and members of the White House's legislative team huddled last night to come to a compromise on several sticking points. 

For most of today,  even as the details were still being ironed out,  the bill appeared to have a clear path to become law. But late this afternoon, three Republican senators and independent Bernie Sanders threatened to delay passage of the stimulus bill. Republican senators Lindsey Graham, Ben Sasse, and Tim Scott  pushed for caps on unemployment benefits that could be claimed as part of the package. And in response, Sanders, the Vermont senator and presidential candidate, argued that the bill didn’t contain enough protections for workers of companies receiving loans or bailouts.

Stocks tumbled into the closing bell, to end the day well off their afternoon highs. The Dow Jones Industrial Average closed up 496 points, or 2.4%, after having been up more than 1,300 points in the afternoon. Nonetheless, Tuesday and Wednesday represent the Dow’s first back-to-back gains since the first week of February. The index is up over 14% in that time, largely thanks to Tuesday’s near-record 11.4% rally.

The S&P 500 ended the day up 1.2%, also well below its earlier highs, while the Nasdaq Composite dipped into the red in the final minutes of the day, to close down 0.5%. Both indexes also soared on Tuesday as it became clear that a compromise on a stimulus package was close.

Two days of consecutive gains for the first time in over a month are nice for beleaguered investors who are long the stock market, but don't call it a trend just yet. Big up days are as much a feature of volatile bear markets as big down days are. At today's highs, the Dow was on pace for its best two-day gain since March 1933 (the depths of the Great Depression), the S&P 500 since October 1987 (the two days after Black Monday's 20% drop), and the Nasdaq since November 2008 (the financial crisis).

The eventual passage of the $2 trillion fiscal stimulus bill will be welcome news to investors for sure, but they're far from out of the woods. Confirmed coronavirus cases and deaths are still accelerating. And all that new federal spending won't stop the economic data from getting a whole lot worse in the very near future.

Tomorrow morning's weekly jobless claims will be a doozy. Compiled by the U.S. Department of Labor, the report tallies all the individual state totals of the number of people applying for unemployment insurance for the first time. Economists are forecasting several million applicants—up from about 200,000 jobless filers two weeks earlier. Lisa Beilfuss has more on what to expect from tomorrow's report here.

Elsewhere in markets today, the yield on short-term three-month U.S. Treasury bills fell below zero, to close at -0.005%. Negative bond yields—long present in Europe, Japan, and other developed economies—have come to the U.S. When investors are willing to buy a bond that guarantees they'll lose money, it demonstrates how negative their outlook is for the risk-adjusted return of other assets available to them.

The only way the bet could pay off is if the Federal Reserve lowers its benchmark rate even lower than zero before the Treasuries mature in three months. Chairman Jerome Powell and other Fed officials have said they don't plan to use negative rates any time soon. Alexandra Scaggs has more on that here.