Stocks Trim Weekly Surge……
U.S. stocks pulled back following a three-day surge that saw the Dow post the largest rally since the Depression era. Stocks seemed to find some resistance as the Street continued to grapple with the ultimate impact of the COVID-19 pandemic and whether or not Monday’s sharp drop established a floor for the equity markets. However, stocks still registered sharp weekly gains that came courtesy of the massive fiscal and monetary policy responses from Congress and the Federal Reserve, with the House today following the Senate in passing a more than $2.0 trillion aid package. Treasury yields lost ground, along with gold and crude oil prices, while the U.S. dollar extended a recent retreat from multi-year highs. February personal income and spending both rose, while consumer sentiment fell to a multi-year low in March. Lululemon and KB Home were the latest companies to hold off on providing guidance due to the heightened coronavirus uncertainty. Asia was mixed and Europe fell as EU lawmakers failed to agree on stimulus measures.
The Dow Jones Industrial Average fell 915 points (4.1%) to 21,637, the S&P 500 Index dropped 89 points (3.4%) to 2,542 and the Nasdaq Composite declined 295 points (3.8%) to 7,502. In heavy volume, 1.4 billion shares were traded on the NYSE and 3.9 billion shares changed hands on the NASDAQ. WTI crude oil decreased $1.09 to $21.51 per barrel and wholesale gasoline was up $0.01 at $0.61 per gallon. Elsewhere, the Bloomberg gold spot price was $8.55 lower to $1,622.79 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.9% to 98.41. However, the equity markets jumped on the week, as the DJIA surged 12.8%, the S&P 500 rallied 10.3% and the Nasdaq Composite gained 9.1%.
Volatility remained at extreme levels and despite today’s pullback, the major markets posted hefty weekly gains to follow last week’s largest tumble since 2008. The week saw the S&P 500 surge into a technical bull market—rising more than 20% from Monday’s low—after taking less than a month to register a bear market—at least a 20% drop from a recent high—which was the fastest ever. a
The recent swift rebound for the equity markets came as the Senate passed a $2.1 trillion “phase three” fiscal stimulus package that also quickly passed in the House today. The massive bill includes loans to businesses of all sizes, hospitals, and airlines and cargo carriers, as well as direct payments to households, tax deferrals and extended deadlines, along with aid to municipalities and increased unemployment support. The Federal Reserve is also deploying drastic monetary policy measures aimed at restoring financial market functioning to proper levels, which has boosted the Central Bank’s balance sheet above $5.0 trillion for the first time ever. The Fed’s measures include open-ended purchases of Treasury and mortgage-backed securities, purchases of corporate bond securities, the expansion of commercial paper funding to facilitate the flow of credit to municipalities, and plans to create a lending program for eligible small-and-medium sized businesses. Yesterday, Fed Chairman Jerome Powell stressed that the Central Bank is not running out of ammunition and has policy room for more action. In the wake of the tidal wave of fiscal and monetary policy stimulus measures, the markets shrugged off yesterday’s surge of more than three million in unemployment claims, which trounced the previous record high in 1982.
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