- Investors look past yesterday's $2 trillion U.S. stimulus deal and refocus on pandemic fears
- ECB to buy unlimited bonds to support eurozone economy
- Markets are eagerly awaiting today's U.S. Initial Jobless Claims release
- The U.S. Q4 GDP print will also be announced today. No change is expected
- Futures on the S&P 500 Index decreased 1.8%.
- The Stoxx Europe 600 Index fell 2%.
- The MSCI Asia Pacific Index declined 0.1%.
- The Dollar Index decreased 0.3%.
- The euro climbed 0.4% to $1.0925.
- The British pound increased 0.4% to $1.1929.
- The Japanese yen gained 0.7% to 110.42 per dollar.
- The yield on 10-year Treasuries decreased seven basis points to 0.80%.
- Germany’s 10-year yield fell five basis points to -0.31%.
- Gold decreased 0.6% to $1,607.76 an ounce.
- West Texas Intermediate crude decreased 3.1% to $23.74 a barrel.
Key Events
Futures contracts for U.S. major indices including the S&P 500, Dow Jones and NASDAQ, along with most global shares, trimmed gains on Thursday, after the spirited rally of the past two days. Market optimism fueled by the promise of unprecedented U.S. stimulus faded as worries about the worst global pandemic in 100 years returned to the spotlight.
Yields dropped and the yen strengthened.
Global Financial Affairs
We've noted previously that throwing more and more money at the economic problems stemming from the COVID-19 outbreak won’t necessarily solve them. The current bear market is a result of a clear lack of real growth, with manufacturing lines and supply chains experiencing their worst disruptions since WWII.
As long as the number of global and U.S. cases continues to rise and the fatality count increases, bulls will find themselves increasingly alone.
However, knowing there is sufficient liquidity to avoid bank runs may steer the world out of a severe global depression, such as hasn't been seen in almost a century. While it may be economically sound to keep the arteries of the economy pumping, the market won't rise in any significant way until it finally bottoms out. And we haven't yet seen that—not by a long shot.
S&P 500 futures slumped after the number of coronavirus cases in the U.S. topped 69,000 and the death toll neared 1,000.
A two day gain formed a potential, small, H&S bottom. This could be the technical impetus for an upward correction within the downtrend, as the 50 DMA reaches the topside of the 200 DMA, either confirming support or triggering a death cross.
Even after the ECB said it would do 'whatever it takes' to fight off the virus-fueled economic contraction, by buying unlimited quantities of bonds in order to inject an infinite amount of liquidity into the eurozone economy, the pan-European STOXX 600 Index fell, after two up-days. Miners and energy shares dipped on profit-taking.
Earlier this morning, Asian stocks were sold off as well. Japan's Nikkei 225 lost 4.5%, South Korea's KOSPI dipped 1.09% while China's Shanghai Composite and Hong Kong's Hang Seng each fell less than 1%. Australia’s ASX 200 (+2.30) bucked the trend in a massive way, (+2.30%), but the Aussie rose.
During the Wall Street session yesterday, U.S. shares registered their first back-to-back gains since Feb. 12, after investor confidence returned—thanks to a deal pointing to Congress finally passing a bill for an unprecedented fiscal rescue package that will hopefully counter the coronavirus economic fallout.
The S&P 500 saw its biggest two-day advance since November 2008. Boeing (NYSE:BA) rallied +24%, lifting the price-weighted Dow Jones Industrial Average to its best two day performance since 1987. Still, the blue-chip index is down about 25% from its February record.
Yields, including for the benchmark U.S. 10-year Treasury, fell.
This completed a bearish pattern, confirming the downside breakout of a bearish flag.
The dollar stumbled for a fifth straight day.
The USD penetrated the top of a rising channel and is now heading back toward the psychological, round 100.00 level, which is also the top of a failed broadening pattern.
Oil's rally fizzled.
The WTI rebound, which yesterday took it over $25 per barrel, has now reversed, threatening a downside breakout, completing a back-to-back bearish pattern, without the upward correction toward $30 we expected. Supply of the currently volatile commodity will also play a key part in whether prices head higher, or lower.