Friday March 20th

20-03-2020

The Dow is set to open 400 points higher, a second day of gains; tech shares jump

U.S. stock index futures jumped on Friday, pointing to a second day of gains. Nasdaq futures hit ‘limit up’ levels on exchanges. As of 7:44 a.m. ET, Dow Jones Industrial Average futures were up about 460 points, implying a gain of 400 points at the open on Friday. S&P 500 futures were up about 2%. Nasdaq-100 futures jumped 3.4% and were “limit up” earlier in the session, meaning no trades could take place above those levels. CME Group halts futures at certain bands in overnight trading in order to curb panic trading. Futures have hit these extreme levels multiple times during this volatile month, mostly to the downside. A number of factors contributed to the positive sentiment: California issued a statewide order to “stay at home” for its residents, the kind of drastic measures investors have been hoping for to slow the spread of the novel coronavirus and reduce the long-term economic damage. The U.S. dollar declined after central bank actions. A global rush into the greenback for safety and liquidity has sent the currency soaring, but at the same time it’s given another hit to big U.S. exporters by raising costs at this difficult time. Tech shares are bouncing as investors bet the sector can weather a recession. Shares of Microsoft were up more than 6% in premarket trading. Friday’s moves built on the previous session’s gains. The Dow climbed nearly 1% on Thursday as tech and energy shares sparked a massive turnaround rally. Those gains were a break from the relentless selling seen in the market as investors checked their recent pessimism over a coronavirus-induced business slowdown. The Dow entered Friday’s session down 13.4% for the week and was on pace for its biggest one-week fall since October 2008, when it slid 18.2%. The S&P 500 was down more than 11% week to date after dropping 11.5% last week. The Nasdaq was down 9.2% through Thursday’s close. “The markets are trading more on emotion than the actual data,” said Sal Bruno, chief investment officer at IndexIQ. “That’s what’s causing the volatility.” “We’ve seen assets just trade off, really for no good reason, but just because there’s fear,” he said. “When we look back at this, we’ll see how much of this was information-based trading and how much was emotionally based trading.” On Wednesday, the Dow closed below 20,000 for the first time since February 2017. Investors are hoping that was the bottom and that the stock market can recover as virus cases peak in the coming months and government stimulus kicks in. The 30-stock index remains 32% below its all-time high level from February, while the S&P 500 is 29% below its high. The Fed has also announced a number of stimulus measures in addition to Congress’s efforts, but it hasn’t assuaged investors’ fears. “Market volatility will persist until the government – fiscal or monetary – provides a backstop to stressed corporates and small & medium businesses,” New York Life Investments’ Lauren Goodwin said Thursday. “Support of those functions is vital to ensuring the economic disruption of covid-19, though severe, is temporary,” she added. The U.S. central bank has pushed out more than $200 billion in monetary stimulus this week alone. That number could be much higher by the end of Friday. Stocks in Asia Pacific rose on Friday as China kept its loan prime rates unchanged. South Korean stocks, which saw heavy losses on Thursday, jumped by the close as the Kospi advanced 7.44% to 1,566.15 while the Kosdaq index surged 9.2% to 467.75. Hong Kong’s Hang Seng index also jumped 3.97%, as of its final hour of trading. Mainland Chinese stocks also edged higher on the day, with the Shanghai composite 0.47% higher while the Shenzhen composite added 0.166%. Markets in Japan were closed on Friday for a holiday. Oil prices gave back early gains to turn negative on Friday, even as the world’s richest nations poured unprecedented aid into the global economy to stop a coronavirus-driven recession and U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia. Brent crude futures fell 4 cents to trade at $28.43 per barrel. U.S. crude futures for April fell 50 cents, or 2%, to trade at $24.72 per barrel. Gold prices rose 2% on Friday as safe-haven buying offset a rush for cash amid fears over the economic hit from the coronavirus, but bullion was headed for a second weekly drop as investors sold the metal to meet margin calls in other assets. Spot gold gained 2.2% to $1,502.57 per ounce after a 1% fall in the previous session and was en route to post a near 3% decline for the week. U.S. gold futures climbed 1.9% to $1,508.70.