Market Insights 3/23/2020

U.S. equities finished lower in another roller-coaster ride of a day, with the uncertainty of a near $2.0 trillion fiscal stimulus package remaining after Congress was unable to pass the legislation for a second time today.

Expectations continue to run high that Congress will eventually vote in favor of a deal, but the delay has kept the markets on edge. The drama in Washington overshadowed the massive monetary policy stimulus measures announced by the Federal Reserve this morning.

The Fed said it will purchase Treasuries and mortgage-backed securities “in amounts needed,” along with plans to buy corporate bonds, support the municipal bond market functioning, and a lending program to aid small-and-medium sized businesses.

Treasury yields were lower in continued volatile trading and the U.S. dollar trimmed a recent rally, while crude oil prices were higher and gold jumped. Markets in Europe and Asia finished lower.

The Markets…

The Dow Jones Industrial Average fell 582 points (3.0%) to 18,592

The S&P 500 Index lost 68 points (2.9%) to 2,237

The Nasdaq Composite declined 19 points (0.3%) to 6,861

In heavy volume 1.6 billion shares were traded on the NYSE and 4.3 billion shares changed hands on the NASDAQ

WTI crude oil rose $0.73 to $23.36 per barrel and wholesale gasoline was down $0.20 at $0.41 per gallon

The Bloomberg gold spot price soared $55.95 to $1,554.60 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% lower at 102.42

Treasury yields see pressure as volatility continues

Treasuries saw demand as the extreme volatility in the markets continued in the wake of the Fed’s increased stimulus measures and as the markets continue to wait to see if U.S. lawmakers will deliver a near $2.0 trillion fiscal stimulus package.

The yield on the 2-year note declined 6 basis points to 0.31%, the yield on the 10-year note dropped 19 bps to 0.77%, and the 30-year bond rate decreased 22 bps to 1.33%.

Today’s economic calendar was void of any major releases, but the ball will get rolling tomorrow with the releases of the preliminary manufacturing and services PMIs as reported by Markit, with economists projecting respective readings of 44.0 and 42.0, with 50 the level that divides expansion and contraction in activity, as well as new home sales for February, expected to have declined 1.8% month-over-month to an annual rate of 750,000.

Europe and Asia fall as pandemic continues to roil the markets

European equities remained lower amid the overnight disappointment from the snag of a near $2.0 trillion U.S. fiscal stimulus package in Congress yesterday. Stocks fell back in the red after trimming the downside move briefly following another dose of measures from the Federal Reserve to combat to impact of the COVID-19 pandemic. Europe remains hampered by the spreading coronavirus that has shifted the epicenter of the outbreak to the region, leading to many key countries going on lock-down to exacerbate the outlook for the economic impact.

The U.K. FTSE 100 Index was down 4.3%, France’s CAC-40 Index declined 3.3%, Germany’s DAX Index decreased 2.1%, Spain’s IBEX 35 Index dropped 3.3%, Italy’s FTSE MIB Index traded 1.1% lower, and Switzerland’s Swiss Market Index moved 5.4% to the downside.

Stocks in Asia mostly tumbled again to begin the week, with the global markets remaining hampered by the expected extreme economic and health impacts of the COVID-19 pandemic, exacerbated by the highly-anticipated near $2.0 trillion U.S. fiscal stimulus package that hit a snag in the Senate over the weekend.

India’s S&P BSE Sensex 30 Index felt the brunt of the heavy selling pressure, plunging 13.2%, while Australia’s S&P/ASX 200 Index fell 5.6% and South Korea’s Kospi Index dropped 5.3%. China’s Shanghai Composite Index traded 3.1% lower and the Hong Kong Hang Seng Index declined 4.9%. However, Japan’s Nikkei 225 Index bucked the trend, rising 2.0% despite some strength in the yen.