New York Times: “There are two main reasons: First, trillions of dollars of stimulus money from the Fed and Congress come with an implicit guarantee that the government will limit investors’ risk no matter how bad it gets. Second, the periodic glimmer of positive news fuels investors’ optimism that things can only get better.”
Italy’s Credit Rating Just One Notch Above Junk
Financial Times: “Fitch has downgraded Italy’s credit rating to a single notch above ‘junk,’ saying the jump in debt levels resulting from the coronavirus crisis will increase doubts about the sustainability of Rome’s borrowings.”
Senate Will Take Action on Embattled Fed Pick
“The Senate Banking Committee is expected to mark up Judy Shelton’s nomination to the Federal Reserve next Tuesday, a signal she is expected to pass the panel along with Christopher Waller, another Fed nominee,” The Hill reports.
“Shelton has since backed off her advocacy for returning to the gold standard.”
Fed Props Up Stock Prices
Wall Street Journal: “They say the Fed’s extraordinary interventions — which include lending programs and asset purchases—make equities more attractive to hold with government bond yields near zero and other havens like gold also near peaks. Meanwhile, many hope Congressional stimulus measures will help carry businesses and consumers through the lockdowns. But some analysts caution that restarting global commerce will be a slow, painful process, prompting some worries that stocks are rising too quickly.”
Bets Against Stocks Rise to Highest Level in Years
“Short sellers have revived their wagers against the stock market in recent weeks, taking their most aggressive positions in years,” the Wall Street Journal reports.
Stock Market and Economy Head In Different Directions
Wall Street Journal: “The Dow Jones Industrial Average staged its best two-week performance since the 1930s, a dramatic rebound that has left many investors with a confounding reality: soaring share prices and a floundering economy.”
Earnings Season Offers Next Test for Stock Market
Wall Street Journal: “The kickoff of earnings season this week will give investors a first glimpse of the impact of the coronavirus shutdown on corporate profits—and potentially clues about the outlook for the rest of the year.”
“Those results will offer a test for a stock market that is attempting to rebound after a bruising selloff. The pandemic is expected to cause a severe economic contraction and a sharp decline in corporate earnings in 2020. What remains unknown is the extent of the damage.”
Trump Celebrates Stock Market Run
President Trump sent out a jubilant tweet celebrating four good days for the stock market while the reported coronavirus death toll in the United States overtook Spain’s to become the second highest in the world.
New York Times: Everything is awful. Why is the stock market booming?
Relief Bill Allows Fed to Not Keep Records
“Tucked into the recent recovery bill was a provision granting the Federal Reserve the right to set up a $450 billion bailout plan without following key provisions of the federal open meetings law, including announcing its meetings or keeping most records about them,” Politico reports.
“The provision, the existence of which has not been previously reported, further calls into question the transparency and oversight for the biggest bailout law ever passed by Congress. President Trump has indicated he does not plan to comply with another part of the new law intended to boost Congress’ oversight powers of the bailout funds…”
“The changes at the central bank – which appear to have been inserted into the 880-page bill by sympathetic senators during the scramble to get it approved — would address a complaint that the Fed faced during the 2008 financial crisis, when board members couldn’t easily hold group conversations to address the fast-moving economic turmoil.”
The Next Financial Crisis
“The U.S. mortgage finance system could collapse if the Federal Reserve doesn’t step in with emergency loans to offset a coming wave of missed payments from borrowers crippled by the coronavirus pandemic,” Politico reports.
“Congress did not include relief for the mortgage industry in its $2 trillion rescue package — even as lawmakers required mortgage companies to allow homeowners up to a year’s delay in making payments on federally backed loans.”
Stock Market Sees Biggest One-Day Jump Since 1933
“U.S. stocks rallied sharply Tuesday, with the Dow surging to its biggest one-day gain in more than 85 years on signs that lawmakers and the Trump administration were nearing a deal on a giant stimulus package aimed at limiting the economic fallout of the coronavirus pandemic,” the Wall Street Journal reports.
Washington Post: “The massive stimulus is designed to be a lifeline to Americans and their employers until the coronavirus is brought under control and the country returns to some semblance of normalcy. The Federal Reserve signaled the gravity of the situation Monday when, in an unprecedented move, said it would spend whatever it takes to preserve the U.S. financial system.”
Top Executives Sold Shares Just In Time
“Top executives at U.S.-traded companies sold a total of roughly $9.2 billion in shares of their own companies between the start of February and the end of last week,” the Wall Street Journal reports.
And a reader reminds me of this post from November.
Stock Futures Up on Hopes of Rescue Deal
“Futures contracts tied to the major U.S. stock indexes surged in early trading Tuesday on hopes an agreement on a stimulus bill to rescue the economy from the coronavirus was close,” CNBC reports.
Fed Announces Major Expansion of Market Supports
“The Federal Reserve announced a major expansion of lending programs Monday that are designed to unclog credit markets that seized up last week, expanding its facilities to include certain types of corporate and municipal debt,” the Wall Street Journal reports.
“The rate-setting Federal Open Market Committee said the purchases of Treasury and mortgage securities that it approved one week ago are essentially unlimited, and the central bank said it would buy $375 billion in Treasury securities and $250 billion in mortgage securities this week.”
Stock Market Futures Plummet Again
“U.S. stock futures opened sharply lower on Sunday night as Wall Street waits on Washington to agree to an economic stimulus and rescue plan to combat the giant economic blow from the coronavirus outbreak,” CNBC reports.
“Dow Jones Industrial Average futures fell more than 900 points, or 5%, to hit their ‘limit down’ level.”
Market Selloff Isn’t Over Yet
“The most brutal stretch for global markets since the financial crisis likely isn’t over yet, say investors and analysts who believe it is too early to assess the possible scale of economic damage from the coronavirus,” the Wall Street Journal reports.
When Trump Talks, Stocks Keep Tanking
Associated Press: “Over the course of the last eight days–all on which he held extended news conferences about the coronavirus response in the midst of trading — his comments haven’t stopped the bleeding. The Dow has lost more than 17% since March 13, and has plummeted more than 34% since the market hit an all-time high Feb. 19.”
“The president’s decision to offer daily affirmations to the health of the stock market, and the economy writ large, is not surprising. But no president has tied his fortunes to Wall Street more closely than Trump, who until the market crash bragged that the rising stock market was evidence of his success leading the economy.”
Treasury Bill Yields Turn Negative
Financial Times: “U.S. Treasury bill yields dipped below zero while longer-dated government debt yields rose on Wednesday in a sign of frightened investors flocking to more easily traded securities during the global market tumult.”
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