Stocks Tumble Into the Close…..

After rallying sharply yesterday, and spending most of the day mixed, U.S. equities fell sharply in the final minutes to finish lower in today’s session, as optimism surrounding progress of a potential COVID-19 vaccine and the continued reopening of global economies came up against a variety of events, earnings and data for investors to ponder. Focus was on the Congressional testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin, and the lone report on today’s economic docket showed that housing starts fell more than expected. Heavyweights from the retail sector headlined the earnings front, as Dow member Walmart topped Q1 expectations and withdrew its guidance, while fellow Dow component Home Depot posted mixed results and pulled its outlook. Kohl’s Corporation reported a larger-than-expected loss, but Southwest Airlines offered some upbeat bookings results thus far in May. Treasury yields were lower amid a rise in bond prices, as was the U.S. dollar, while crude oil prices and gold finished higher. Europe came off the lows of the day to finish mixed, whereas markets in Asia saw gains.

The Dow Jones Industrial Average lost 391 points (1.6%) to 24,207, the S&P 500 Index decreased 31 points (1.1%) to 2,923, and the Nasdaq Composite shed 50 points (0.5%) to 9,185. In moderately heavy volume, 875 million shares were traded on the NYSE and 4.2 billion shares changed hands on the NASDAQ. WTI crude oil nudged $0.31 higher to $31.96 per barrel and wholesale gasoline gained $0.02 to $1.05 per gallon. Elsewhere, the Bloomberg gold spot price increased $11.95 to $1,744.50 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 99.50.

Housing starts for April tumbled 30.2% month-over-month (m/m) to an annual pace of 891,000 units, below the Bloomberg forecast of 900,000 units. This was the lowest level in starts since February 2015. March starts were revised higher to an annual pace of 1,276,000. Moreover, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, fell 20.8% m/m to an annual rate of 1,074,000, north of expectations of 1,000,000 units, and compared to March’s upwardly-revised 1,356,000 rate.

The markets paid close attention to testimony before the Senate Banking Committee from Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin this morning. The two discussed the extraordinary monetary and fiscal relief measures that has poured trillions of dollars into the financial system and economy to combat the severe COVID-19 disruption. In prepared remarks, Powell noted that the Federal Reserve’s response to this extraordinary period has been guided by its mandate to promote maximum employment and stable prices for the American people, along with its responsibilities to promote stability of the financial system. He reiterated that the Central Bank is committed to using its full range of tools to support the economy in this challenging time even as it recognizes that these actions are only a part of a broader public-sector response. Powell pointed out that Congress’s passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was critical in enabling the Federal Reserve and the Treasury Department to establish many of the lending programs to support credit needs of large employers, loans to small and medium-sized businesses, and aid state and local governments.

Treasuries were modestly higher, as the yield on the 2-year note ticked 1 basis point (bp) lower to 0.17%, while the yield on the 10-year note lost 5 bps to 0.69%, and the 30-year bond rate was down 4 bps at 1.42%.

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