Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

The Fed's Got Stock Traders' Backs

Published 07/14/2020, 05:34 AM
Updated 07/09/2023, 06:31 AM

A big reversal from Monday’s regular trading session saw the major indexes rush back up into the green, with the Dow gaining another 2.1%, or 556 points, the S&P 500 +1.34% and the Nasdaq +0.94%. Aside from a couple better-than-expected Q2 earnings results from JPMorgan JPM and Citigroup C this morning, the big boost came from Fed Governor Lael Brainard, who spoke at a webcast hosted by the National Association for Business Economics.

In her address, Brainard said that the Fed should utilize large-scale asset buys to keep the economy liquid amid a “thick fog of uncertainty” relating to the coronavirus pandemic, and should be practiced for a “sustained” period. She also said the ongoing economic recovery “will face headwinds for some time,” as we see this week with a re-shutdown of businesses in California amid a spike in new COVID cases.

While this doesn’t necessarily sound like good news, exactly, the Fed is once again saying it sees what the economy will potentially be going through, and is willing to do what it takes to make sure it will not seize up as a result of a turbulent re-entry to a “normal” domestic business existence. This was enough to keep indexes bidding up; the Down is now a mere 10% off its all-time highs, while the S&P 500 is only 6% off the pace. The Nasdaq, which hit new all-time highs mid-day yesterday before the big selloff on the California shutdown news, remains about 3% off new highs.

One stock up big Tuesday was Align (NASDAQ:ALGN) Technologies ALGN, which rose nearly 11% — nearly the entire gains for the stock in the month of June — though the reason was not due to any earnings surprise (Align reports Q2 a week from tomorrow), but from a strike call option expiring Friday, at $300. Tesla (NASDAQ:TSLA) TSLA, however, rose again on a fresh price target from Piper Sandler (NYSE:PIPR), which now expects Tesla to climb to $2322 per share, more than 50% higher than the current stock price. Tesla is having an unbelievably strong trading year, and saw Robinhood app traders add Tesla positions at a rate of 10K per hour for a portion of the past day.

Brainard’s comments today — as well as those similarly remedy-minded remarks from St. Louis Fed President James Bullard — now put the ball squarely into Congress’ court. Many relief programs passed earlier for COVID-related struggles in terms of businesses shuttering and millions of layoffs are due to expire within the next month; without more stimulus — especially with a renewed shutdown currently in the works in the U.S.’s most populous states — the economy may be in for more hurt than most investors are pricing in at the moment.

Questions or comments about this article and/or its author? Click here>>

Is the Market Rigged?

Computer-driven High-Frequency Traders (HFTs) manipulate the market thousands of times a day – and their gains come at the expense of human investors. Zacks has mounted a Counterstrike to take advantage of the best profit opportunities created by HFTs. Access to these recommendations must be limited; the doors close soon.

See Counterstrike Trades Now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

JPMorgan Chase Co. (NYSE:JPM): Free Stock Analysis Report

Citigroup Inc. (NYSE:C): Free Stock Analysis Report

Align Technology, Inc. (ALGN): Free Stock Analysis Report

Tesla, Inc. (TSLA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.