LPL Financial closed April 10. Please note the stock and bond markets and LPL Financial will be closed Friday, April 10. We will return to our normal business schedule Monday, April 13.
Stocks reverse earlier losses, open nicely higher. Stocks are adding to Wednesday’s rally as the S&P 500 Index tries to build on its 23% bounce from the March 23 lows. The reversal higher ahead of the open was driven by $2.3 trillion in stimulus programs announced by the Federal Reserve (Fed) (discussed below). Beyond the massive policy response, market participants continue to focus on COVID-19 containment efforts, another surge in weekly jobless claims (also discussed below), and extreme volatility in the oil markets. Consumer confidence and producer price inflation data are on tap for today and Fed Chairman Jerome Powell will speak this morning on the US economy and will surely comment on today’s policy announcements.
Fed announces new initiatives to support the economy. If you thought the Fed had exhausted its options to support the economy, think again. The Fed announced additional programs this morning that can provide as much as $2.3 trillion of additional backing, including purchases of municipal bonds and loans to small and mid-sized businesses, expanding credit facilities, and support for financial institutions that lend to small businesses. The Fed continues to show it is fully committed to dedicating every resource available to support the economy through this challenging period.
Oil rallies on OPEC deal optimism. OPEC leaders and Russia are reportedly close to a deal to cut production to help offset both a severe global demand shock from the COVID-19 pandemic and a price war in which Saudi Arabia ramped up production to pressure other players to exit the market. US participation will likely occur via market forces, something that is already happening with prices per barrel in the mid-$20s and below the marginal cost of virtually all US shale.
Biden the presumptive nominee. Stocks got a boost Wednesday from the news that Bernie Sanders would drop out of the Democratic presidential race, leaving Joe Biden as the presumptive nominee. We know markets don’t like uncertainty, and this news removed some of it, while Biden is considered more business friendly. The markets will continue to take cues from progress toward containing the pandemic and the timetable for reopening the economy for quite some time.
New unemployment claims continue to climb sharply. 6.6 million workers filed a new claim for unemployment in the week ending April 4, bringing the three week total to 16.8 million. By comparison, new claims for all of 2008 totaled 21.7 million. New claims continue to climb at an unprecedented rate as efforts to contain the COVID-19 pandemic shut down large segments of the economy. The trend may be able to reverse course nearly as quickly once the economy is able to open up again.
GDP forecasts explained. Second quarter domestic output is tracking toward a historic drop with so much of the country shut down. While the true extent of the damage is little more than a guessing game, there has been some confusion about what the extreme forecasts being thrown around mean. We explain later today on the LPL Research blog.
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