The stock market selloff deepened on Thursday following a spate of bad economic news that included a further plunge in labor data, the collapse of a Wall Street investment bank, and the continued spread of the coronavirus. The selloff has erased nearly all the gains the market made since late March as the government and central banks unleashed lending and emergency aid.
Downward Spiral From Jobs Data
The Labor Department reported on Thursday that another 1.41 million Americans had filed for unemployment benefits, pushing the total number of job losses in the past few months past 39 million. Additionally, the number of Americans continuing to receive unemployment benefits jumped by almost 1 million to 21 million for the week ending June 6th—indicating that the labor market situation is not improving.
Financial losses were exacerbated when legendary Wall Street firm Cantor Fitzgerald was forced to liquidate its retail brokerage arm, B. Riley Financial. Cantor Fitzgerald said it had traded the assets at a “significant loss” and laid off 330 employees as part of the move. The news sent a chill through the financial markets, with many analysts worrying that more Wall Street firms could follow suit.
U.S. Stocks Suffer Worst Week Since March
The Dow Jones Industrial Average dropped more than 600 points on Thursday and was on pace for its fifth-straight weekly decline, its longest losing streak in more than four years. The S&P 500 and the Nasdaq Composite also both dropped significantly, signaling that the market bearishness was across the board.
What Caused the Stock Market Selloff?
The primary cause of the stock market selloff has been disappointing economic data from the Labor Department that showed the labor market recovery has stalled. The 1.41 million Americans filing for unemployment shows that the labor market is far from recovering and that job losses are still mounting. This data, along with the news of Cantor Fitzgerald’s retail brokerage arm collapsing and the continued spread of the coronavirus, has led to the market sell-off.
Investors Turn Away From equities
The disappointing economic news has caused investors to turn away from equities and favor cash, bonds, and gold. The US dollar index has also been gaining strength as a result of the market sell-off.
The Way Forward
Going forward, investors will be watching to see if the market can rebound from the treacherous economic news. The focus will be on whether the economic data turns around or continues its dismal trend. Investors should also be monitoring the government’s response to the spreading pandemic and the efforts of central banks to provide further stimulus to help keep the markets afloat.
What To Do If You’re An Investor
For investors, the best course of action is to review the current portfolio and assess their risk tolerance. Investors should also take a hard look at the stocks they own and determine if they are still suitable for their investment goals. They should also consider selling off some of their holdings if they are below the original purchase price. Finally, investor should also consider diversifying or strengthening their portfolio by investing in other asset classes like bonds or gold.
The stock market selloff continues to deepen as investors flee equities in the face of further bad economic news. The disappointing labor data and the collapse of Cantor Fitzgerald’s retail arm have caused panic in the markets, leading to a broad sell-off in the major indices. Investors should be vigilant in evaluating their portfolios and taking the necessary steps to protect their investments.
