I’m not sure I’d call it a “reprieve”, exactly. After all, Thursday’s swings on US benchmarks were large by normal standards, but seemed pedestrian compared to recent volatility.
The Nasdaq stuck out like a sore thumb, surging 2.3% (it was up much more), outpacing the broader market by the largest margin since the crisis years.
Tesla, Twitter and Netflix all rose at least 7% at one juncture. Gains on Wall Street faded into the close.
The Russell 2000 jumped more than 6%. As silly as this most assuredly is, the gauge has moved 6% or more in either direction in seven consecutive sessions, and eight of the last nine.
Oil rose the most in history thanks in part to Trump jawboning.
Sentiment may be getting a modest boost from the ECB’s €750 billion emergency asset purchase plan, the BOE’s expansion of QE and the Fed’s moves to expand swap lines and shore up money market funds. It’s pretty clear that monetary policymakers got the message, and the Fed has checked a lot of boxes that were unchecked last week.
But the underlying economic reality is stark. “We are officially declaring that the economy has fallen into a recession and it is a deep plunge”, BofA said. “Jobs will be lost, wealth will be destroyed and confidence depressed”. The bank sees a 12% contraction in Q2 of this year. JPMorgan reckons the economy will shrink 14%.
Data out Thursday underscored the notion that a storm is coming. The Philly Fed index plunged to -12.7, an insane 49.4-point slide from February. That comes on the heels of this week’s ghastly read on the Empire gauge.
Jobless claims jumped the most since November 2012 last week. You can expect that to continue.
Trump seems resigned to the economy’s fate. The administration said the government could take equity stakes in companies that are bailed out and prevent them from repurchasing shares. Oh, what a turn of events – just two years ago we were delivering a tax windfall to the C-suite, opening the door to another year of massive buybacks.
Cash handouts to the public (i.e., mailed checks) are now all but certain to be included in a third virus relief package, and will likely start going out within a month – or at least that’s the feeling one gets from the news flow on the Hill, where lawmakers are rushing to finalize a $1 trillion package. Treasury is pondering financing options including 50- and 25-year issuance.
AT&T is looking for a credit line, while Ford suspended its dividend and pulled its guidance. Ray Dalio warned of $4 trillion in losses for corporate America.
In a testament to the palpable sense of consternation, Lipper said outflows from investment grade bond funds in the week through Wednesday were $35.5 billion.
Finally, in a truly disconcerting development considering the relative size of the populations, Italy has surpassed China in coronavirus deaths.