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S&P 500 Down 17 points: 1.3 Million More Jobless, Oil Stocks Crashing, COVID Cases Climbing

By Jason Hall – Jul 9, 2020 at 5:55PM

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A number of worrying signs point to more problems ahead for stocks and the economy.

Bad news across the economy and industries is driving stocks lower today. The S&P 500 Index (^GSPC 2.59%) is down 17 points, or 0.6% on July 9, following multiple bad pieces of news.

Another 1.3 million Americans filed for employment last week, sending retail stocks, including Kohl's (KSS 3.54%) and Simon Property Group (SPG 1.37%), down 7.3% and 5.5%, respectively. The government's weekly petroleum report showed a massive build in inventories, sending oil stocks, including Hess Corp (NYSE: HES)Apache Corp (NASDAQ: APA), Phillips 66 (NYSE: PSX), and ConocoPhillips (NYSE: COP), down between 5.6% and 7.6%. 

Walgreens Boots Alliance (WBA 3.28%) reported a loss in its fiscal third quarter, sending shares down 8%. U.S. COVID-19 cases continue to accelerate, with the most new cases on record and the death toll yesterday higher than the prior three days combined.

Today's biggest S&P 500 loser is flooring manufacturer Mohawk Industries (MHK 2.72%), with shares off 21% on allegations of fraud by a major investor who has filed suit. 

Red arrow points left, while many more black arrows point right.

Image source: Getty Images.

Needless to say, investors looking for a reason to sell stocks have plenty of options today. 

Another ugly jobs report sends retail stocks lower

The U.S. Department of Labor released its weekly jobs report, reporting initial claims for unemployment of 1.3 million for the week ended July 3. That's a small improvement from last week's revised total of 1.4 million and well below the levels from early in the economic crisis. But prior to the coronavirus pandemic, 1.3 million newly unemployed people would have dwarfed the prior records. The prior weekly record was set during the global financial crisis, at 665,000 in April 2009.

That's barely more than a bump on the line compared to current levels. The unemployment rate has also remained much higher than during prior economic downturns as a result: 

US Initial Claims for Unemployment Insurance Chart

US Initial Claims for Unemployment Insurance data by YCharts

Two retail stocks taking a beating today are discount retailer Kohl's and retail property owner Simon Property Group, both down more than 7% today. Continued worries about retail's ability to continue recovering has investors running scared. Both are down about 60% this year. While their near-term prospects are bad, both have the balance-sheet strength to ride things out for some time to come and will likely emerge in good shape when a full recovery happens. 

Oil market still drowning in crude

The oil sector continues to be one of the hardest hit, with producers still pumping more oil than is being consumed and inventories rising as a result. The U.S. Energy Information Administration released its weekly petroleum status report, reporting a 9.8 million-barrel increase in total petroleum inventories last week. Crude oil in commercial storage is now 18% above the five-year average, while total petroleum products in commercial storage are up a massive 162.7 million barrels from last year.

Between continued production and imports, the U.S. has not done enough to offset new oil coming to market at levels to match the double-digit drop in demand. Tens of millions of Americans continue to operate under work-from-home policies, while the economic collapse and climbing cases of COVID-19 have brought air transportation and much business travel to a near halt. 

U.S. crude prices are down 3.5% today, below $40 per barrel for the first time in July, and still off the 2020 high by more than one-third. As a result, oil stocks are taking it on the chin, with oil producers Hess, Apache, and ConocoPhillips down between 7% and 9.5%, and integrated giant Phillips 66 down 8%. 

Walgreens Boots Alliance loses $1.7 billion

The U.S./UK pharmacy giant reported its fiscal third-quarter results this morning, and investors were not pleased. Total revenue held up relatively well considering the impact of the global pandemic on its retail operations, with $34.6 billion roughly the same as last year's quarter. However, management said it lost more than $700 million in sales as a result of the downturn and government-ordered retail shutdowns that particularly impacted -- and continue to harm -- its U.K. business. 

As a result, the company took $2 billion in impairment charges for its U.S. Boots pharmacy business in the quarter, driving a net loss of $1.7 billion, or $1.95 per share. The company expects to earn $4.65 to $4.75 per share for the full year, including impacts from COVID-19, and the board approved a small 2.2% increase in the dividend. That keeps it on the Dividend Aristocrats list, with 45 straight years of dividend growth. 

COVID-19 takes a turn for the worse

In recent weeks, daily cases of COVID-19 have accelerated at an enormous rate, though the market has generally shrugged off those concerns, in part because the death toll has stayed low and actually fallen in recent days to some of the lowest levels on record. 

Today, that trend took a turn for the worse. Daily cases were a record 64,771, according to the U.S. Centers for Disease Control and Prevention (CDC), and the death toll of 991 was more than the prior three days combined.

Healthcare professionals and infectious disease experts have been cautioning the public that the death counts could start rising; it's been just over two weeks since cases started increasing sharply across the U.S., and over that period, acute cases that require hospitalization and the number of people in ICUs have steadily moved higher. With stocks already at some of the highest levels of volatility on record, investors should be prepared for a continued rough ride so long as COVID-19 remains a serious threat to society's ability to return to normal. 

Jason Hall owns shares of Phillips 66. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Walgreens Boots Alliance, Inc. Stock Quote
Walgreens Boots Alliance, Inc.
$32.43 (3.28%) $1.03
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,678.43 (2.59%) $92.81
Kohl's Corporation Stock Quote
Kohl's Corporation
$26.04 (3.54%) $0.89
Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
$90.98 (1.37%) $1.23
Mohawk Industries, Inc. Stock Quote
Mohawk Industries, Inc.
$93.67 (2.72%) $2.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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