Markets Gain on Virus Optimism, Political Clarity…..

U.S. equities finished higher amid some renewed optimism over the U.S.’ battle against the coronavirus, and after Bernie Sanders dropped out of the 2020 Presidential race to remove some uncertainty on that front. However, caution remained, as the obscurity of the size and length of the extreme disruption of the world’s largest economy persisted. Meanwhile, the minutes from the Federal Reserve’s emergency March 15th meeting that began the flood of extraordinary monetary policy measures were released, reflecting the Committee’s concern over the economic impact of the outbreak. Crude oil prices jumped in late-day trading ahead of tomorrow’s key OPEC+ meeting, which is expected to deliver production cuts, while investors are also looking to see whether Saudi Arabia and Russia can bring an end to their price war. The Treasury yield curve steepened, while the U.S. dollar and gold saw modest gains. In other economic news, mortgage applications fell, while on the equity front, Dow member McDonald’s reported a plunge in March global same-store sales, while it also withdrew its outlook and suspended its stock buyback campaign. European and Asian markets finished mostly lower.

The Dow Jones Industrial Average rose 780 points (3.4%) to 23,434, the S&P 500 Index increased 91 points (3.4%) to 2,750 and the Nasdaq Composite advanced 204 points (2.6%) to 8,091. In moderately heavy volume, 1.2 billion shares were traded on the NYSE and 3.4 billion shares changed hands on the NASDAQ. WTI crude oil jumped $1.46 to $25.09 per barrel and wholesale gasoline was up $0.03 at $0.68 per gallon. Elsewhere, the Bloomberg gold spot price was $3.30 higher at $1,657.67 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—gained 0.3% to 100.16.

At 2:00 p.m. ET, the Federal Reserve released the minutes from its March 15th emergency policy meeting that took the target for the fed funds rate to near zero and began the wave of monetary policy measures aimed at providing an unprecedented arsenal for the war on the coronavirus. The report showed the Committee’s concern about the economic impact of the coronavirus pandemic, noting that, “All participants viewed the near-term U.S. economic outlook as having deteriorated sharply in recent weeks and as having become profoundly uncertain.” As well, “Members judged that the effects of the coronavirus would weigh on economic activity in the near term and would pose risks to the economic outlook,” and that the target for the fed funds rate will remain at the range of 0% to 0.25% until the economic effects of the outbreak passes. The decision was not unanimous, as Cleveland Fed President Loretta Mester opted for a 50-basis point cut in order to provide the Fed with more flexibility.

Treasuries were mixed, as the yield on the 2-year note lost 3 bps to 0.26%, while the yield on the 10-year note gained 3 bps to 0.76% and the 30-year bond rate advanced 4 bps to 1.37%.

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