Stocks Rally on Plans for Government Aid…..

U.S. equities finished higher, bouncing off yesterday’s tumble that was the worst drop since 1987, following comments from Treasury Secretary Mnuchin at a midday White House press briefing, as well as reports of details surrounding a $1 trillion government aid package. Mnuchin said that the Trump Administration is looking to get emergency funds to Americans “immediately” to help remedy some of the financial stress afflicting citizens amid the unprecedented measures taken to combat the spread of the COVID-19 outbreak. As well, the Fed announced another additional $500 billion operation to go with its emergency announcement over the weekend that took rates to zero and delivered a $700 billion stimulus package, and reinstated measures used during the global financial crisis in 2008, starting with offering commercial paper funding support. In notable equity news, Boeing called for short-term aid from the White House for the air travel industry. Treasury yields were sharply higher, especially on the mid-to-long end of the curve, and gold rose, while crude oil prices finished lower in choppy action, and the U.S. dollar rallied. News on the economic front was robust, as retail sales unexpectedly fell and homebuilder sentiment dipped, though industrial production and job openings both came in stronger than expected. Europe finished higher, flowing in the U.S’ footsteps after the White House briefing, while Asia was mixed.

The Dow Jones Industrial Average rose 1,049 points (5.2%) to 21,237, the S&P 500 Index increased 143 points (6.0%) to 2,529 and the Nasdaq Composite gained 430 points (6.2%) to 7,335. In heavy volume, 1.9 billion shares were traded on the NYSE and 4.8 billion shares changed hands on the NASDAQ. WTI crude oil lost $1.75 to $26.95 per barrel and wholesale gasoline was $0.02 higher at $0.71 per gallon. Elsewhere, the Bloomberg gold spot price advanced $17.12 to $1,531.22 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rallied 1.5% to 99.54.

Stocks rebounded from yesterday’s drop, which was the largest since the 1987 crash, and after pre-market trading activity briefly hit “limit up,” a triggered trading halt that kicks in when the markets hit a 5.0% threshold on the upside or the downside. The markets have hit these trading restrictions several times in less than two weeks and the Volatility Index sits near a record high.

Meanwhile, the Federal Reserve has deployed a decisive emergency monetary policy campaign, including a $700 billion lending package and a cut to its target range for the fed funds rate to 0.00-0.25%, from 1.00-1.25%.

Advance retail sales for February decreased 0.5% month-over-month (m/m), versus the Bloomberg forecast of a 0.2% gain, and well below January’s upwardly-revised 0.6% increase. Last month’s sales ex-autos moved 0.4% lower m/m, compared to expectations of a 0.1% increase and January’s upwardly-revised 0.6% rise. Sales ex-autos and gas declined 0.2% m/m, compared to estimates of a 0.3% gain, and January’s reading was adjusted higher to a 0.7% rise. The control group, a figure used to calculate GDP, was flat m/m, south of projections of a 0.4% gain and January’s favorably-adjusted 0.4% gain. Sales were solidly lower for clothing, electronics and appliances, motor vehicles, building materials, and food services and drinking places, though activity at non store retailers—which includes online shopping—gained ground.

The Federal Reserve’s industrial production rose 0.6% m/m in February, above estimates of a 0.4% increase, and January’s negatively-adjusted 0.5% drop. January’s unseasonably warm weather returned to more typical levels and utilities output jumped, while Boeing’s significantly slowed production was offset by a large gain for motor vehicles and parts, leading to a 0.1% tick higher for manufacturing production. Mining production fell. Capacity utilization ticked higher to 77.0% from the prior month’s downwardly-revised 76.6% rate, and versus expectations of 77.1%. Capacity utilization is 2.8 percentage points below its long-run average.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, unexpectedly rose to 6.96 million jobs available to be filled in January, from December’s upwardly-revised 6.55 million figure and north of forecasts calling for 6.40 million. The report showed the hiring rate dipped to 3.8% from 3.9% and separations nudged lower to 3.7% from 3.8%.

©2020 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.