Stocks Lose Ground Amid Stimulus Delay

Hi Everyone,

The major indices all finished lower following another chaotic session on Wall Street, as despite the Fed’s “unlimited” quantitative easing (QE) program, investors remained defensive due to the rapid spread of the virus and the Senate’s failure to pass a massive stimulus bill. The Dow was down 582, or 3.0%, to18,592, the Nasdaq lost 19, or 0.3%, to 6,861, while the S&P 500 fell by 68, or 2.9%, to 2,237. Decliners outnumbered advancing issues by an almost 3-to-1 ratio on the NYSE, where volume remained extremely heavy.

Traders said that while the relatively strong Nasdaq barely lost ground today, the Dow and the S&P 500 hit new bear market lows with especially the financial sector dragging the benchmarks down. As one trader explained, “The S&P 500 and the Dow hit their lowest levels since late-2016 as the woes regarding the financial sector’s profitability got stronger in the wake of the Fed’s unprecedented move, causing an exodus out of the shares of large-cap banks.”

The COVID-19 crisis entered its “U.S. phase” over the weekend, with the East Coast reporting a huge jump in confirmed cases for three days in a row, and with several states announcing restrictions. Tomorrow, well over one-third of the country will be under some kind of lockdowns, and the situation in Europe also remains gloomy. The total number of cases crossed 350,000 today, and since only Asia has been reporting steadily improving numbers, global economic uncertainty remains very high, even considering the coordinated interventions.

Gold was the clear winner of today’s historic session, as the precious metal surged by the most in over a decade on the Fed’s incredible monetary expansion, boosting the shares of gold miners as well. Treasury yields plunged across the board, especially on the long-end of the yield curve. The Dollar Index (DXY) barely budged, as the global dollar shortage persists. Overseas equities also finished the day lower, with European stocks, in particular, being under siege due to the gloomy economic outlook.

While the key index futures surged higher by almost 10% (!) in pre-market following the Fed’s announcement, the fact that the highly anticipated stimulus package got delayed weighed heavily on equities throughout the session. The Fed’s steps failed to calm global currency and credit markets, and the dollar’s strength was especially pronounced against emerging market currencies. Several crashed to new all-time lows. U.S. credit markets diverged substantially too; while investment-grade bonds rallied strongly, high-yield credit continued to plunge, which could put more pressure on the financial sector.

As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!

Joe

Skills

Posted on

March 24, 2020

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