Investment Commentary – March 24, 2020
Year to Date Market Indices as of Market Close March 24, 2020
• Dow 20,704 (-27.45%)
• S&P 2,447 (-24.25%)
• NASDAQ 7,417 (-17.33%)
• Gold $1,669 (9.80%)
• Oil $24.33 (-60.25%)
• Barclay Bond Aggregate (1.07%)
• Fed Funds Rate 0-0.25 (-0.50% 3/15/20)
• US Real GDP Growth 2.1 Q4/2019
Dow posts best percent gain since 1933 on hope for plan to rescue economy from coronavirus
U.S. stocks soared Tuesday, with the Dow Jones Industrial Average notching its biggest one-day point gain ever and its best percentage gain since 1933, a day after plumbing the lowest levels since 2016, amid growing optimism that Congress will come to an agreement on a fiscal stimulus package aimed at combatting the economic impact of the coronavirus epidemic.
How did benchmarks perform?
The Dow DJIA, +11.36% rose 2,112.98 points, or 11.37%, to close at 20,704.91, the S&P 500 index SPX, +9.38% advanced 209.93 points, 9.38%, to close at 2,447.33, and the Nasdaq Composite index COMP, +8.12% gained 557.18 points, or 8.12%, ending trading at 7,417.86.
For the year to date though, the Dow is down 27.45%, the S&P 500 has lost 24.25%, and the technology-heavy Nasdaq is 17.33% lower.
What drove the market?
U.S. lawmakers inched toward an agreement on a roughly $2 trillion coronavirus rescue package, helping to reignite buying on Wall Street for the moment, after lawmakers on Monday twice failed to reach an agreement, sending stocks into a fresh tailspin.
Senate Minority Leader Chuck Schumer said from the Senate floor that he had “very good” discussions with U.S. Treasury Secretary Steven Mnuchin, and just before noon claimed that an agreement was on the “two-yard line.” The trading day ended with no concrete next steps in place, but some investors suggested the market sell-off of the past few weeks may have been overdone.
“Even in bear markets, you can end up being oversold, and I think that this market was stretched like a rubber band that, at least in the near term, was ready to snap back,” Sam Stovall, chief investment officer at CFRA Research told MarketWatch.
Coronavirus update: 407,405 cases, 18,227 deaths, Italy shows glimmer of hope and NYC remains U.S. epicenter
GM withdraws 2020 guidance, Chevron cuts capex and suspends share buybacks and Ford, 3M and GE to cooperate in making much-needed face masks
The coronavirus case tally continued to rise on Tuesday with the total number of cases globally exceeding 400,000 for the first time, with Italy remaining the most affected country in Europe, while New York continued to lead the U.S. in number of cases and deaths.
There now at least 407,405 cases and 18,227 people have died, according to the latest data from the Johns Hopkins Whiting School of Engineering’s Centers for Systems Science and Engineering. At least 104,234 people have already recovered.
In Italy, there are at least 69,176 confirmed cases and 6,820 deaths while 8,236 people have recovered. Italian policy makers continue to urge people to stay home and observe social distancing. Italy has had more deaths than China, which continues to report 3,281 deaths.
There was a glimmer of good news on Tuesday, when Italy recorded a smaller day-to-day increase in new cases for a second straight day. Data released by Italy’s Civil Protection agency showed 4,789 new cases from a day earlier, nearly 700 fewer than the day-to-day increase of 5,560 new cases reported Sunday, the Associated Press reported. There were just over 600 more virus-related illnesses registered in Italy on Monday compared with 651 on Sunday, according to the AP.
Elsewhere in Europe, in Spain, the case tally has climbed to 39,676 and 2,800 people have died. In Germany, the case tally has grown to 31,991 and 149 people have died. In France, the case tally stands at 20,149 with 862 deaths.
Around the Web
Stimulus rescue: For the second week in a row, the NASDAQ declined sharply but outperformed other major U.S. indexes, as did information technology sector stocks that make up a relatively large share of the NASDAQ. The work-from-home shift by many employees amid the COVID-19 outbreak has boosted demand for many tech-related services.
Bear roars again: Hopes for a rebound rally amid the bear market that began the prior week were dashed, as the three major U.S. indexes posted losses ranging from nearly 13% to 17%. The declines came amid growing expectations that the COVID-19 outbreak will cause major damage to the economy, despite monetary and stimulus interventions.
Gains reversed: The sell-off in the wake of the stock market’s climb to record highs just last month left the Dow slightly below its level of January 2017, when President Donald Trump took office; the S&P 500 remained just above that mark. The S&P 500’s closing level on Friday was about 32% below its recent record.
Activist Fed: On the heels of an interest-rate cut that reduced the benchmark U.S. rate to near 0.00%, the U.S. Federal Reserve on Friday extended its : asset purchase program into short-term municipal bonds, expanding on earlier moves targeting Treasury bonds and mortgage-backed securities. The broader initiative is aimed at bolstering liquidity and stabilizing credit markets.
Tech buffer: For the second week in a row, the NASDAQ declined sharply but outperformed other major U.S. indexes, as did information technology sector stocks that make up a relatively large share of the NASDAQ. The work-from-home shift by many employees amid the COVID-19 outbreak has boosted demand for many tech-related services.
Global cash dash: Moves by the U.S. Federal Reserve to bolster the U.S. credit market were part of a broader global stabilization initiative by central banks such as the Bank of England and the European Central Bank. In addition, the Fed established a temporary program to provide liquidity to nine central banks in countries such as South Korea and Singapore, an extension of a similar program targeting five larger developed nations.
Thursday: Fourth-quarter GDP, third estimate, U.S. Bureau of Economic Analysis. Weekly unemployment claims, U.S. Bureau of Labor Statistics
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.