DAILY INSIGHTS
Stocks up on Fed day. After Tuesday’s gains faded late in the session, stocks opened solidly higher this morning ahead of the Fed’s policy announcement scheduled for this afternoon. Market participants also have a wave of earnings news, first quarter gross domestic product (GDP) report, and positive news on Gilead’s COVID-19 treatment to digest. Asian markets were mostly higher overnight with Taiwan and Australia seeing sharp gains. European markets are mostly higher in midday trading.
GDP contracts the most since 2009. US GDP growth in the first quarter contracted an annualized 4.8% according to the initial estimate released this morning. The contraction provides added confirmation that the economy likely entered a recession in March. Markets will likely discount the backward-looking data, and even the much larger contraction expected in the second quarter, remaining focused on the timing and pace of the economy reopening.
The Fed is on deck. The Federal Reserve is set to announce its latest interest rate policy, but it is widely expected to leave the benchmark rate at 0%–0.25% and make very little change to the policy statement. What the Fed says about the state of the economy later in 2020 is going to be key. Do they see a quick recovery or not? Also, focus will be on future asset purchases and expanding lending facilities.
Have stay-at-home growth stocks peaked? The most expensive growth stocks (trailing price-to-earnings ratios over 50) have rallied sharply during the first four months of the year, even as the broad market declined. Much of that strength has been driven by gains in companies benefiting from stay-at-home orders as we discuss later today on our LPL Research blog.
Silver lining in consumer confidence data. The Conference Board’s Consumer Confidence Index for April came in at 86.9, one of the biggest monthly drops ever. But there was a silver lining in the report, as the expectations component of the survey actually rose by more than 5 points. This budding optimism is great to see, as we discuss later today on the LPL Research blog.
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