The Market Sum | Insight after the bell Friday's Headlines 1. DJIA rallies 9.3%, nearly recouping Thursday's losses 2. S&P 500 rallies most since 2008 3. Trump declares national emergency, releasing $50B in funds 4. How deep is the downturn, and what to do next 5. What to expect next week Dow
23,185.62
+1,985.00
(+9.36%) | | S&P
2,711.02
+230.38
(+9.29%) | | Nasdaq
7,874.88
+673.07
(+9.35%) | | | | | | Bitcoin
$5,428.09
−$415.25
(-7.11%) | | US 10-Yr Yield
0.951
+0.1020
(+12.01%) | | | | | | Russell 2000
1,209.07
(-27.53%) | | Crude Oil
$33.39
(-44.88%) | | US 10-Yr Yield
0.9510
(-50.44%) | | | | Markets Today It was another historic day to end a historic week as U.S. markets rallied off the mat, posting some of the biggest one-day gains since 2008. The DJIA rallied 9.3%, nearly recouping all of yesterday's losses, while the S&P 500 posted its biggest one-day jump in more than 12 years. A raft of stimulus measures by the U.S. and other governments announced in the past two days, including this afternoon, buoyed investors who have been waiting for a broader multinational response to the coronavirus. They heard some of that today as the Trump administration declared a national emergency under the so-called Stafford Act, which releases $50 billion in financial assistance to address the medical emergency, as well as activating FEMA and other agencies to respond to the crisis. In addition, Trump announced that the interest on student loans would be waived, and that the Dept. of Energy would be purchasing a "large amount", of cheap crude oil to "fill up" the Strategic Petroleum Reserves. The President also announced a public-private partnership with companies like Walmart, Roche, Google, and CVS to increase testing in the U.S. For the latest list of all the stimulus measures by governments around the world, read this: Government Stimulus Efforts to Fight the COVID-19 Crisis As for today's historic rally, it's yet another enormous move in what has been the most volatile month in market history. Keep in mind that big moves in the market are usually followed by more big moves in the following days. We've had that and more this week. Check out those candlesticks below, and have a safe and healthy weekend.  Headlines: - Mortgage rates are climbing higher as potential buyers retreat over virus fears. According to a National Association of Realtors (NAR) survey, 16% of realtors reported seeing a drop in buyer interest related to the coronavirus, and 1 in 4 sellers are changing how they market their homes, some going entirely online.
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Alphabet (GOOGL) is reportedly working on a website for coronavirus testing, according to an announcement by President Donald Trump this afternoon. Trump said that Google has 1,700 engineers working on the effort now. - Disney (DIS) announced it will halt all live-action film production as the coronavirus spreads. It is also closing Disney World, the first time Disney has shut the park since the 9/11 attacks.
- Delta Air Lines (DAL) will cut passenger-carrying capacity by 40% to deal with a nosedive in travel demand. It is reportedly talking to the White House and Congress about assistance to get through a downturn caused by the new coronavirus. The 40% cut in passenger-carrying capacity is the largest in Delta's history, surpassing reductions that were made after the 9/11 attacks.
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Gold futures posted their worst week since 2011, joining the collapse across global markets that not even the traditional safe haven could avoid. In the rush to raise cash and cover losses in other markets, investors are pulling their money out of the precious metal, typically seen as a store of value amid market volatility and global worries. - Microsoft (MSFT) has announced that founder and former CEO Bill Gates is leaving the company's board. Gates co-founded the software giant in 1975 with Paul Allen, who died in 2018.
- Warren Buffett's Berkshire Hathaway (BRK.B) said on Friday it will hold its annual meeting as scheduled on May 2, but without shareholders in physical attendance due to the coronavirus outbreak. The meeting will be live-streamed on Yahoo as usual, Buffett said in a letter to investors.
- New York State now has the most coronavirus cases in the U.S. as new cases jumped 30% overnight to 421. New York City is under a state of emergency as of yesterday.
- Xerox (XRX) is pausing its $35 billion bid for HP Inc. (HPQ), citing health and safety reasons, the company said in statement. It intends to continue its pursuit of HP when the pandemic stabilizes, a person familiar said. HP has repeatedly rebuffed its efforts, arguing the takeover price undervalues the company and has raised other issues with the proposal.
- Verizon (VZ) is investing $500 million in network infrastructure and AT&T (T) is suspending data caps for broadband customers. The changes are in anticipation of more employees and students working remotely. Lawmakers are pressuring internet service providers to remove data caps and throttling.
- Italy and Spain have banned short selling on dozens of stocks after markets suffered record losses yesterday. Germany's Deutsche Boerse is also considering a similar ban, according to a spokesperson.
 chart courtesy YCharts Modeling the Economic Impact of COVID-19 Preparing economic models for Black Swan events like the coronavirus outbreak is as tricky as it sounds. Nevertheless, that's what financial institutions do in order to prepare investing scenarios for themselves and their clients. The latest, from the Bank of America economic team foretells a likely recession in the second quarter, and potentially deflation as prices fall due to lack of consumer demand. Here is how the bank sees this all playing out: - The economy flirts with recession in Q2 with -0.5% growth. We expect slightly positive growth in Q3 with signs of a recovery starting in Q4. This leaves us with an annual growth rate of 1.2% this year, the slowest in this expansion.
- Job growth slows meaningfully, starting in April. We look for private payroll growth to average only 30,000 through Q2. The total will look a bit better due to Census 2020 hiring. The unemployment rate turns higher, peaking at 3.9% in Q4 2020.
- Core inflation will remain below the Fed's 2% target for another year, while headline PCE (Personal Consumption Expenditures) contracts for a couple months, reflecting the drop in oil prices. We sliced 0.3 percentage points from our core PCE year-end 2020 forecast to 1.7% and see downside risks.
So...What Should Be Done About It? That's the other thing financial institutions are working on as they try to influence government officials to take swift action to backstop the economy. Here's Morgan Stanley's investment team's recipe for bolstering the economy for the coming shock: - A quick, sizeable response from public health, monetary, and fiscal authorities.
- A significant ramp up of testing for the virus and mitigating measures, especially in the U.S., will lend greater clarity to the extent of the outbreak.
- A monetary response, in particular the expansion of central banks' sheets, will be critical to unfreeze the financial markets.
- Fiscal easing should be taken up to manage the burden on healthcare systems, provide relief to affected sectors, and then provide a boost to demand in order to provide a backstop to global growth.
Some of those measures were announced in the past 24 hours, and we expect more monetary easing when the Federal Reserve meets next week. What to Expect from the Week Ahead To start off, here's how different asset classes have performed year-to-date:  Here's a list of economic events for the week ahead:
Sunday, March 15:
- Chinese Industrial Production (Feb.)
- Chinese Fixed-Asset Investment (Feb.)
Monday, March 16: - Mexican Market Holiday for Benito Juarez's Birthday
- Indian Wholesale Price Index (WPI) (Feb.)
- Italian Consumer Price Index (CPI) (Feb.)
- New York Empire State Manufacturing Index (March)
Tuesday, March 17: - Japanese Industrial Production (Jan.)
- U.K. Average Earnings Index (Jan.)
- U.K. Unemployment Claimant Count Change (Feb.)
- German ZEW Economic Sentiment (March)
- Eurozone Wages (Q4)
- U.S. Retail Sales (Feb.)
- U.S. Industrial Production (Feb.)
- U.S. Business Inventories (Jan.)
- U.S. Job Openings and Labor Turnover Survey (JOLTS) Job Openings (Jan.)
- Japanese Trade Balance (Feb.)
Wednesday, March 18: - Eurozone CPI (Feb.)
- Eurozone Trade Balance (Jan.)
- U.S. Building Permits (Feb.)
- U.S. Housing Starts (Feb.)
- Canadian CPI (Feb.)
- Federal Reserve Open Markets Committee Statement (FOMC) and Interest Rate Decision
- Japanese Core CPI (Feb.)
- Bank of Japan Interest Rate Decision
Thursday, March 19: - Philadelphia Fed Manufacturing Index (March)
- Philadelphia Fed Employment (March)
- Canadian New Housing Price Index (Feb.)
Friday, March 20: - Japanese Market Holiday for the Vernal Equinox
- German Producer Price Index (PPI) (Feb.)
- Canadian Core Retail Sales (Jan.)
- U.S. Existing Home Sales (Feb.)
Stimulus:
Countries around the world have been implementing stimulus policies to counteract the economic harm done by COVID-19. The efforts have ranged widely in both size and scope. While the Federal Reserve made a significant unscheduled interest rate cut (more on that below) the U.S. Federal government has been more uneven with its commitment to providing a significant fiscal stimulus package. At time of writing, Congress is still fighting over what to include in said package, but President Trump declared a state of emergency, which would allow up to $50 billion in emergency funding for states and cities. Stocks rebounded quite a bit on the news, showing that the markets certainly react to promises of stimulus. Therefore, it behooves us to watch to see how Congress follows this up. For more on stimulus efforts from around the world, check here.
Chinese Industrial Production:
With quarantines and factory closures across the country throughout February, it was clear China's industrial production would take a hit. However, the extent of said hit is unclear. When China announces industrial production on Sunday, March 15, keep an eye out to see how much disruption the virus has caused.
Federal Reserve Meeting:
The U.S. Federal Reserve announced a 0.50% interest rate cut earlier this month, about two weeks before its scheduled meeting next Wednesday. The cut was the largest since the financial crisis, with all moves in the last few years, both up and down, being done in 0.25% increments. The Fed stepped things up to try and ease the economic disruption caused by the coronavirus outbreak, which has thrashed markets and damaged economies the world over. The Fed's regularly scheduled meeting is this Wednesday, and there is talk of an even larger move, a whole percentage point down to 0% rates. That would be another strong signal that the Fed, which has been so cautious in the past few years with interest rates, considers the current crisis to be the most dangerous since the global financial crisis.
U.S. markets bounced back today with natural gas firms such as Range Resources and EQT leading the pack. Oil and natural gas firm Centennial Resource Development was pummeled as shale drillers have suffered in recent days. Gold miners Royal Gold and Newmont dropped today as gold prices fell as stocks rebounded. Moderna, the biotech firm working on the coronavirus vaccine, fell again today. Word of the Day Economic Stimulus Economic stimulus consists of attempts by governments or government agencies to financially stimulate an economy. An economic stimulus is the use of monetary or fiscal policy changes to kick-start growth during a recession. Governments can accomplish this by using tactics such as lowering interest rates, increasing government spending, and quantitative easing, to name a few. Today in History March 13, 1986 Today in 1986, Microsoft had launched its IPO. Its stock price at its IPO was $21.00 a share, and valuing the company at just under $800 million, of which CEO Bill Gates had a 45% share. Those numbers are now $154.29 and $1.2 trillion respectively. Microsoft became the largest software company in the world by 1987. Its growth was spectacular making Bill Gates, for a time, the richest man in the world. Microsoft is currently the largest company in the S&P 500. Source: CNBC Enjoy the Market Sum? Share it with a friend. CONNECT WITH INVESTOPEDIA |
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