The stock indexes roared the last three days after the spending package was completed (still the House hasn’t signed, but that should happen today). The DJIA recovered 4,000 points since Monday. Interest rates edged lower as did the entire curve, although the movements have been relatively small compared to equity markets. The House members went home this week, now scrambling to bring back enough legislators to form a quorum to pass a $2 trillion economic package. Getting members on record will be interesting.
Now the question: how quickly the various aids will get to where they are intended. The agencies that have the responsibility to move the aid are not known for speed. Government institutions, especially the Treasury, will be asked to deliver enormous amounts of aid, racing against skyrocketing jobless claims that hit over 3 million yesterday likely another +2 million next Thursday. The $2 trillion stimulus package is likely only the beginning. We expect additional assistance to come. The rules for deciding who will get that and how it will be distributed are a work in progress. The legislation specifies that 10 days after it becomes law, Treasury will publish guidelines on application requirements and how to get loans.
This morning stock indexes started lower in the futures markets. At 8:00 am ET, the Dow Jones Industrial Average fell almost 3%, suggesting the index may open over 600 points lower. The rally over the last three days pulled the DJIA back into bull market territory, that is what media and the optimists are touting. It has been a nice recovery with professional investors gobbling up many stocks that will improve with the $2 trillion package. Yesterday Jerome Powell admitted the US economy is in recession; that shouldn’t come as a surprise. The improvements in the last few days, a welcome turn, but the US and global equity markets continue to be extremely volatile. Indicators point to investors remaining on edge; the CBOE Volatility Index, a closely watched measure of turbulence in US stocks, jumped to near-historic levels.
The virus and its dire impact on the economy isn’t likely short term. Q2 growth will likely be -15%;
yr./yr. forecasts at the moment are wide and unreliable. Analysts and economists are making guesses about how long the virus will affect growth. Not worth guessing other than to expect 2020 won’t be a year of much growth.
At 8:30 am ET, this morning Feb personal income and spending income +0.6% on estimates of +0.4%; spending +0.2% as expected. The PCE +0.1%,
yr./yr. +1.8%; core PVE +0.2%, yr./yr. +1.8% (in line with estimates). It’s a Feb data point.
At 10:00 am ET, the final March U. of Michigan consumer sentiment index, expected at 92.0 from mid-month 95.9. The index slipped to 89.1, the lowest read since Oct 2016.
PRICES @ 10:00 AM ET
10 yr. note: 0.76% -9 bp
5 yr. note: 0.44% -9 bp
2 Yr. note: 0.28% -2 bp
30 yr. bond: 1.34% -9 bp
Libor Rates: 1 mo. 0.940%; 3 mo. 1.374%; 6 mo. 1.057%; 1
yr. 0.972% (3/26/20)
30 yr. FNMA 3.0: @9:30 104.98 +31 bp (+ 77 bp from 9:30 yesterday) 2.5 103.98 +31 bp (+116 bp
from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 104.59 +5 bp (+17 bp from 9:30 yesterday)
30 yr. GNMA 3.0: @9:30 105.61 +30 b bp (+79 bp from 9:30 yesterday)
Dollar/Yuan: $7.0948 +$0.0209
Dollar/Yen: 108.32 -1.25 yen
Dollar/Euro: $1.0997 -$0.0038
Dollar Index: 99.60 +0.25
Gold: $1618.70 -$32.50
Crude Oil: $21.47 -$1.13
DJIA: 21,782.58 -769.59
NASDAQ: 7556.15 -241.39
S&P 500: 2546.74 -82.61