Stocks Hit New Records, United to Shed 16,000 Jobs

Stocks were buoyant on Wednesday, with all three major U.S. indices rising yet again and the S&P 500 and Nasdaq setting record closing highs.

Ironically, some of the biggest economic news of the day was entirely underwhelming, as ADP’s monthly report on private payrolls showed an increase of 428,000 in August — severely disappointing when stacked against estimates for a gain of around 1 million.

[Sign up for stock news with our Invested newsletter.]

In Wall Street logic, however, this slower-than-expected labor market recovery can easily be twisted into a bullish rationale, with markets gaining confidence a stimulus relief package will be passed sooner rather than later.

The Dow Jones Industrial Average rose 454 points, or 1.6%, to finish at 29,100.

Buy now, pay later. U.S. consumers swipe their credit cards. The U.S. government taps international debt markets. This year’s sudden need to respond to the pandemic and provide much-needed government assistance and stimulus, alongside the hit to the economy itself, will result in U.S. debt exceeding its gross domestic product for the first time since World War II.

Does this spell a subsequent downgrade of America’s credit quality? Lower-quality debt typically must pay higher interest rates to investors to compensate for the risk, and downgrades aren’t unprecedented, with the last one happening in 2011.

In late July, credit rating agency Fitch Ratings downgraded its outlook on Uncle Sam’s rating to “negative.”

United cutting 16,000 jobs. United Airlines Holdings (ticker: UAL) announced it would be furloughing over 16,000 employees come Oct. 1, when the airline industry’s government aid runs out. Another highly anticipated round of pandemic relief, which could come out to another $1 trillion or so, would need to include more money specifically to cover airline payrolls to prevent the cuts — something the first stimulus did do (but only through the end of September).

United isn’t the only airline vowing to slash jobs if Uncle Sam doesn’t keep floating the bill; American Airlines ( AAL) said it would lay off 19,000 in its ranks if it didn’t get more money on Oct. 1.

More from U.S. News

Artificial Intelligence Stocks: The 10 Best AI Companies

What Is a SPAC? 6 Best SPACs to Buy

15 of the Best Dividend Stocks to Buy for 2020

Stocks Hit New Records, United to Shed 16,000 Jobs originally appeared on usnews.com

Related Categories:

Latest News

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up