| Wednesday's Headlines 1. US markets split as Fed holds interest rates near zero until 2022 2. Nasdaq hits record high, again 3. What the Fed is worried about 4. Penny stocks on a wild ride Markets Closed
 Image courtesy ac productions/Getty
Markets Today U.S. markets split again as investors favored tech shares, sending the Nasdaq to yet another record high. Apple, Amazon, Netflix, and Tesla all hit all-time highs as well, as the money moved back into growth stocks. The DJIA and S&P 500 fell for the second day in a row, and gold climbed, as it does when investors look for safety given what looks like a long road to recovery.
We kind of knew it would be, but the Federal Reserve reinforced that fact with its decision to maintain interest rates at current levels (0–0.25%) until 2022. If that seems like a long time, it's because it is. It's also very rare for the Fed to make a long-term forecast like that. It did so because it knows this rebound won't be fast and it won't be even. It projects the U.S. economy to shrink by 6.5% this year, the most in recorded history, before bouncing back to 5% in 2021 and 3.5% in 2022. The bounce may not be that high, especially if unemployment remains elevated.
As investors, we learned these things:
Pack a lunch. This is going to take awhile. [NEW READER SURVEY: As promised, we are running another two-week survey of our U.S.-based readers to gauge your sentiment and see what moves, if any, you have been making with your money given the market recovery. We'll share the results, as always, and we thank you for your time and participation.]
Headlines:
 The Fed Stands Pat, but Promises to be Forceful and Aggressive As expected, the Federal Open Market Committee (FOMC) left interest rates unchanged and said it would keep them there into 2022 as the economy tries to recover from the recession brought on by the coronavirus pandemic.
chart courtesy YCharts  What Else Can the Fed Do? The Fed pledged numerous lending facilities in March and April to inject liquidity into the system, including a Main Street Lending Program and plans to purchase distressed corporate bonds known as fallen angels. It hasn't spent money on either of those, yet, but just threatening to do the latter helped boost equity prices as investors felt the steady hand of the Fed on their backs.
Fed Chair Powell said the Fed is about to commit those funds and continue its purchases of government-backed securities, amounting to $80 billion a month in Treasuries and $40 billion in mortgage-backed securities.
The Fed's biggest concerns are the extremely high level of unemployment and the lack of inflation. On the former, the only thing it can do is continue pumping money into the economy and the banking system so borrowing is cheap and banks continue lending to businesses who will hopefully use that money to hire.
As for inflation, the lack of demand for things like travel and dining out have kept consumer prices low for some things, but everything else we are actually buying kind of feels more expensive.  Penny Stocks Soar in Danger Sign Frothy markets bring out the beer muscles in day traders who love volatility and walking on fire. They've been busy lately, as we've noted. In yet another danger sign, stocks trading below $1 per share have an average gain of nearly 80% in the past week, according to a note from the Institutional Equity Derivatives team at Citadel Securities obtained by CNBC.
Citadel looked at the 29 stocks in the small-cap benchmark Russell 2000 with a share price less than $1. In the past five trading days through Monday, the group is up an average of 79% a piece.
It's not just penny stocks that have been on a bender. Stocks of bankrupt companies, or companies on the verge of filing for bankruptcy protection like Hertz and JCPenney, have also been bid up, sold off, and bid up again.
These day trading frenzies are as old as the stock market, and they can't be stopped. But they usually end with just a few winners who knew when to walk away, while those who are new to the table typically get a face-full of humble pie, if not lose their shirts.
chart courtesy YCharts 
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(chart courtesy YCHARTS)  Shares of auto parts company Aptiv are up by 9% following the current electric vehicle excitement that began yesterday. Salesforce's stock price rose 4% today, following other tech stocks to higher highs.  Cruise line stocks, such as Norwegian (nearly 16.5%) and Carnival (12%), are down following a spike in COVID-19 cases in several U.S. states. Airline stocks, such as United (over 13.5%) and Alaskan (over 10.5%), fell following a JPMorgan analyst outlining why the recent price surges and increasing flight schedules can't last in the face of reduced travel demand expected for the fall. Word of the Day Yield Curve ControlYield curve control (YCC) involves targeting a longer-term interest rate by a central bank, then buying or selling as many bonds as necessary to hit that rate target. This approach is dramatically different from the Federal Reserve's typical way of managing U.S. economic growth and inflation, which is by setting a key short-term interest rate, the federal funds rate.  Photo courtesy benjaminfranklin.org
Today in History June 10, 1752: Benjamin Franklin flies a kite during a thunderstorm and collects ambient electrical charge in a Leyden jar, enabling him to demonstrate the connection between lightning and electricity. Franklin became interested in electricity in the mid-1740s, a time when much was still unknown on the topic, and spent almost a decade conducting electrical experiments. He coined a number of terms used today, including battery, conductor, and electrician. He also invented the lightning rod, used to protect buildings and ships.
https://www.history.com/this-day-in-history
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Wednesday, June 10, 2020
The Climb Out
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