The S&P 500 Index (SNPINDEX:^GSPC) lost 7 points, for a small 0.2% decline, on Thursday after the U.S. Department of Labor reported last week's new claims for unemployment. According to the report, 963,000 people filed new applications for unemployment benefits last week, the first time new jobless claims were below 1 million since early March

Investors didn't particularly view the 20% decline in first-time claimants as being a huge positive. Unemployment claims (and the total number of unemployed, which is still above 15 million) continue to weigh heavily on the economy, and economists fear that employers are no longer just furloughing workers. So while the top-line number is trending lower, the reality that those job losses are becoming permanent is a real concern. 

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Image source: Getty Images.

On the earnings front, Cisco Systems (NASDAQ:CSCO) and luxury fashion retailer Tapestry (NYSE:TPR) both reported big declines in sales and profits. Cisco stock was the biggest loser in the index today, down 11%, while shares of Tapestry (where investors were expecting a terrible quarter) lost about 1%. 

Congress is seemingly nowhere close to a stimulus package

Weighing just as heavily on the near-term economic outlook is the continued deadlock in Congress over providing economic support to the millions who are out of work. The CARES Act, passed early in the crisis, provided a generous $600 per week in additional unemployment benefits, paid by the federal government, but that provision expired at the end of July. As a result, the roughly 15.5 million Americans currently unemployed have lost more than $9 billion in weekly income that's no longer going to utility bills, rent or mortgages, credit card payments, or discretionary consumer spending

And it's looking more likely that lawmakers won't reach an agreement before September. House Speaker Nancy Pelosi said that lawmakers are "miles apart" on a compromise, pointing to the divide between how much stimulus Democrats are calling for, and what Republicans have been willing to agree to. 

The implications are significant, with the unemployed already facing the loss of nearly $40 billion in monthly spending power, which could have consequences for the businesses that will lose those cash flows. 

Cisco and Tapestry earnings: all about expectations

Cisco and Tapestry both saw big drops in their results last quarter, but as often works when managing expectations, the one that did worse saw its stock perform much better. Tapestry's revenue fell a brutal 53% as many of its retail stores were forced to close for much of the period. For Cisco, revenue and adjusted earnings fell 9% and 4% respectively, but its stock took a beating, losing 11%. 

Why the disconnect? In short, investors weren't surprised by Tapestry's ugly result, and its guidance was also a little more upbeat, as it sees business picking up in markets like China, where the coronavirus has been more quickly brought under control than in the United States, which continues to struggle with a worse outbreak than almost any other developed nation. 

For Cisco, investors sold on guidance that calls for another quarter of weak sales. The company, which is now in its first fiscal quarter, expects sales will fall about 10% to start the new fiscal year, and earnings per share to fall more than 15% as it shifts away from heavy reliance on hardware, and grows its software and services businesses to meet the market's demand. 

Is Simon Property propping up its malls?

One notable bit of news today is that Simon Property Group (NYSE:SPG), one of the biggest mall operators in the U.S., is leading bidders to acquire J.C. Penney out of bankruptcy. In a partnership with Canadian real estate giant Brookfield Property Partners (NASDAQ:BPY), Simon is reportedly a leader due to the combination of its bid, as well as concessions for owed leases that make it an attractive deal for other creditors. 

This would mark an expansion of Brookfield's and Simon's cooperation to buy troubled tenants, following a deal to buy Aeropostale and Forever 21 with another partner, and Lucky Brands, owned by the two. Can Simon make these deals work long term? Managing real estate and running a retail business are very different propositions. And if retail experts couldn't make money, what makes Simon's management think it has better prospects?

To start, these businesses will not be encumbered by nearly as much debt, and Simon and Brookfield see the need to keep traffic flowing at their properties, or risk losing even more tenants. 

Will a deal be struck, and will it make money for Simon in the long run? Only time will tell. 

Friday looms

Stocks have gained in all but two days the past two weeks, and investors head into Friday with a lot of uncertainty about the economy, and whether Congress can act quickly enough to stave off a deeper fall into recession. Nearly 1 million new jobless claims may look good compared with the past several months, but that number is still almost 50% higher than any other weekly period in U.S. history prior to this year. 

Will those implications be enough to have investors selling heading into the weekend, or will there be a rebound in the optimism that's driven the S&P 500 almost back to all-time highs from February? We'll know this time tomorrow.