As expected, the Senate approved the $2 trillion stimulus package in a unanimous 96-0 vote. Half the battle is won there. The other half still needs to be fought in the House. It should be won there eventually, too, but how quickly is still an open question.
Reports suggest passage in the House by way of a voice vote could happen as soon as tomorrow. Reports also suggest there is a possibility that critics of the bill could force a roll call vote that requires House members to be in attendance to cast a registered vote, which would delay the timing of passage.
Any undue delay at this juncture is not welcome and the mere idea that it’s a possibility is curbing some of the recent buying interest. That was evident at the close of yesterday’s session when gains were cut sharply as reports of opposition to the bill circulated.
There has been some carryover angst this morning, which is reflected in the futures market. That angst, however, isn’t rooted solely in the fiscal stimulus approval process. It is also rooted in some misgivings about the execution of the fiscal stimulus plan, the speed at which the economy will bounce back, and of course what today’s initial claims report would show.
That report was stunning. Initial claims for the week ending March 21 increased by 3,001,000 to 3,283,000. That is the highest seasonally adjusted number for a initial claims by many miles. The prior record was 695,000 in October 1982. Continuing claims for the week ending March 14 increased by 101,000 to 1,803,000, but that number will skyrocket next week as well.
The key takeaway from the report is that it underscores for everyone how much worse the current economic situation is than anything else experienced in this modern age. It is a stark reflection that this time is different.
This also goes to show how crucial it is to get financial aid into the hands of the many businesses and millions of people who desperately need it now.
In a counterintuitive way, then, this jarring initial claims report could be the headline that was needed to ensure the House moves just as quickly as it can to pass the fiscal stimulus bill, which plenty of senators who voted for it already admitted it isn’t perfect, but is altogether necessary to live with in order to get the critical aid where it needs to go as soon as possible.
Strikingly, the futures for the major indices improved following the release of the initial claims data. The S&P 500 futures are currently down six points and are trading 0.2% below fair value.
The other data out this morning included the third estimate for Q3 GDP, which was unrevised at 2.1%, and the Advance International Trade in Goods Balance (-$59.9B), Advance Retail Inventories (-0.3%), and Advance Wholesale Inventories (-0.5%) reports for February. None of this data matters in today’s light.
Separately, we expect an interview CNBC conducted with Paul Tudor Jones to garner a good bit of attention today, because Mr. Jones warned in January that COVID-19 could throw a huge curveball at the U.S. and long-term investors should be nervous.
Mr. Jones said today that the market could test the lows again as the most challenging period for the U.S. with COVID-19 is still ahead, but also added that he sees markets higher in 3-5 months from now. One pressing concern, he noted, is that people are giving the economy too much credit for its resilience right now, meaning it might not bounce back as quickly as some expect.
Everyone will know more with the benefit of time, but time is of the essence in getting fiscal aid into the economy. The initial claims report is all the proof one needs to see in that regard.
Originally Posted on March 26, 2020 – Record Initial Claims Underscore Severity of Economic Situation
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