Initial jobless claims for the week ending March 21, 2020, were a record 3.28 million.
That's 11.6 times the week before, when 281,000 claims were filed, and 4.72 times the previous record of 695,000 Americans seeking benefits way back in the week ending Oct. 2, 1982.
But that didn't stop the Dow Jones Industrial Average from soaring 1,351.62 points, or 6.38%, to 22,552.17 yesterday.
Is that crazy?
NO - and yes.
As frightening as the record number of Americans who filed for unemployment benefits is, in terms of so many people tragically being out of work so suddenly, and what it says about prospects for the businesses that had to let them go, the shock wasn't unexpected.
Economists and Wall Street analysts were expecting, on average, just under 3 million new claims. Street estimates ranged from a low of 1.5 million to 4.4 million.
Prior to the number's release at 8:30 a.m. yesterday, futures on the Dow Jones Industrial Average were trading down between 300 and 500 points. Immediately after the report's release, traders started buying futures contracts, lifting them almost into positive territory.
The reaction surprised a lot of investors, but set the stage for a higher opening an hour later.
Riding the positive tone set by the futures, investors went to work buying shares as soon as the opening bell sounded.
Within seconds, the Dow was up 500 points.
What on the surface seemed like a perverse reaction to depressing news was actually an expression of relief that the number wasn't far worse.
The rally, put in context, wasn't crazy at all - it made perfect sense. Just as all market moves make sense in hindsight.
Investors had been riding a two-day rally on the heels of a horrible Monday sell-off that saw the major benchmarks make new intraday lows and close at their 52-week lows.
Tuesday's record 2,112-point jump higher for the Dow, followed by another 495 point up-move on Wednesday, were the market's first back-to-back up days since February. In other words, stocks had rallied hard and fast immediately after hitting frightening lows.
Investors who missed the rally on Tuesday, but were encouraged by the big bounce and missed the follow-up rally on Wednesday, were suddenly struck with a serious case of FOMO, or fear of missing out.
Seeing futures rebound after the claims number and having already missed spectacular gains off Monday's lows, investors and traders weren't going to let another day of gains pass them by.
With the backdrop of the $2 trillion rescue package nearing congressional approval and the promise of the president's immediate signature, it became a total, almost crazy, "risk-on" day.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.