Thursday March 19th

19-03-2020

Stock futures point to more losses a day after the Dow closed below 20,000 for first time since 2017

U.S. stock index futures pointed to more losses at the open Thursday, building on the previous session’s steep losses as the coronavirus crisis rages on. As of 8:33 a.m. ET, Dow Jones Industrial Average futures were down more than 500 points, implying an opening loss of more than 400 points. S&P 500 and Nasdaq 100 futures also fell. “Markets are clearly in a state of panic and forced liquidations – but risks remain skewed to the upside and this should become much more apparent once some of the solvency issues are addressed,” Adam Crisafulli, founder of Vital Knowledge, said in a note. Higher-than-expected jobless claims data also pressured investor sentiment. Last week, 281,000 people filed for unemployment benefits in the U.S., well above a Dow Jones estimate of 220,000. The moves followed yet another violent day on Wall Street on Wednesday as investors swung back to pessimism after Tuesday’s 6% bounce. The Dow dropped 1,338.46 points, or 6.3%, on Wednesday and clinched its first close below 20,000 since February 2017. The Dow was down more than 2,300 points at the lows of the session. The S&P 500 dropped 5.2% to 2,398.10 and closed nearly 30% below a record set last month as both indexes sank further into bear markets. An eye-watering spike in Treasury yields has also kept investors anxious. The 10-year Treasury rate rose 22 basis points to 1.18% on Wednesday following a rise of more than 30 basis points on Tuesday as it rebounds from record lows. On Wednesday evening, the European Central Bank (ECB) announced a new Pandemic Emergency Purchase Program that will deploy €750 billion ($819 billion) to purchase securities to help support the European economy. The central bank said purchases will be conducted until the end of 2020 and include a variety of assets including government debt. The ECB’s action follows similar initiatives by the Federal Reserve, its U.S. counterpart. The Fed announced earlier this month plans to pump an additional $1 trillion into the U.S. economy through asset purchases and cut the federal funds rate to zero. The Fed also said Wednesday night it will create a backstop for prime money market funds. The spread of the coronavirus also led the New York Stock Exchange to on Wednesday announced that it will temporarily close its historic trading floor and move fully to electronic trading. The exchange said that two people tested positive for the disease at screenings it conducted this week. All-electronic trading will begin on March 23 at the open, the exchange said. Voicing investor fears about the virus, longtime hedge fund manager Bill Ackman joined CNBC on Wednesday to warn that the novel coronavirus will wreak destruction on financial markets and the U.S. economy without unprecedented action by the federal government. Ackman and scores of other economists and investors worry that the virus, and efforts to prevent its spread, could undermine U.S. manufacturing, exports and ultimately U.S. GDP growth. The Pershing Square executive called upon President Donald Trump to start a “spring break” U.S. for one month and suspend all interest, rent and tax payments for the duration. “We need to shut it down now... This is the only answer,” the billionaire investor said. “America will end as we know it. I’m sorry to say so, unless we take this option.” Stocks moved off their lows toward the end of Wednesday’s session, however, after the Senate had enough votes to pass a bill expanding paid leave and unemployment benefits in response to the virus as part of what’s expected to be a whopping governmental response to avoid a downturn. Senate Majority Leader Mitch McConnell said Wednesday he would vote for the plan despite what he called “real shortcomings.” With the urgent need to take action, “I do not believe we should let perfection be the enemy of something that will help even a subset of workers,” he said. The White House is weighing a fiscal package of more than $1 trillion that includes direct payments to Americans and financial relief to small businesses and the airline industry. Wall Street has been on an unprecedented roller-coaster ride amid the coronavirus turmoil, with the S&P 500 swinging 4% or more in either direction for eight consecutive sessions. Stocks in Asia Pacific fell on Thursday as fears over the economic impact of the coronavirus pandemic continued to weigh on investor sentiment. Major markets in the region fell deep into negative territory, with South Korea’s Kospi leading losses as it dropped 8.39% to close at 1,457.64 while the Kosdaq index fell 11.71% to end its trading day at 428.35. The Korea Exchange said earlier during the session that circuit breakers were triggered after the Kospi dropped 8%, with trading halted for 20 mins, according to Reuters. Hong Kong’s Hang Seng index fell 2.27% by the afternoon, as of its final hour of trading. Mainland Chinese stocks were mixed on the day as the Shanghai composite declined 0.98% to about 2,702.13 while the Shenzhen composite rose 0.279% to approximately 1,682.93. The Nikkei 225 in Japan slid 1.04% to close at 16,552.83. Oil prices rose more than 10% on Thursday after a three-day sell off drove them to their lowest levels in almost two decades as demand plummeted due to the coronavirus and supplies surged in a fight for market share between Russia and Saudi Arabia. Benchmark Brent, which has lost half its value in less than two weeks, was offered some respite as investors across financial markets assessed the impact of massive central bank stimulus. Brent crude jumped $1.37, or 5.5%, at $26.26 a barrel, after plunging to $24.52 on Wednesday, its lowest level since 2003. U.S. crude gained $2.29, or 11.2%, to $22.66 after dropping nearly 25% in the previous session to an 18-year low. Gold fell in volatile trade on Thursday as fears of a worsening epidemic and its fallout on the global economy sent investors scrambling for cash. Spot gold was trading down 0.9% at $1,472.00 per ounce. The metal fell about 3% on Wednesday along with other precious metals. U.S. gold futures fell 0.2% to $1,475.70.