Fed’s balance sheet could reach $10 trillion this year: BlackRock
Published: April 8, 2020 at 4:50 p.m. ET, By Mark DeCambre and Joy Wiltermuth
U.S. stocks finished sharply higher Wednesday as investors hoped for more Federal Reserve support and a potential sooner-than-expected rollback of containment measures put in place to fight the COVID-19 pandemic.
Bernie Sanders also ended his race for the White House, removing market uncertainty around his campaign promises to rein in Wall Street and big corporations as president.
How did indexes perform?
The Dow Jones Industrial Average US:DJIA rose 779.71 points, or 3.4%, to finish at 23,433.57. The S&P 500 index US:SPX added 90.57 points, or 3.4%, to end at 2,749.98, and the Nasdaq Composite Index US:COMP climbed 203.64 points, or 2.6%, to close at 8,090.90.
On Tuesday, the blue-chip Dow US:DJIA lost 26.13 points, or 0.1%, to finish at 22,653.86, the S&P 500 index US:SPX shed 4.27 points, or 0.2%, to end at 2,659.41, and the Nasdaq Composite Index US:COMP fell 25.98 points, or 0.3%, closing at 7,887.26.
The Dow is now 20.7% off its record close in February, while the S&P 500 is off 18.8% and the Nasdaq off 17.6%, according to Dow Jones Market Data.
What drove the market?
The White House’s plans for reopening the U.S. economy and an account of the Federal Reserve’s emergency actions taken last month were points of focus for investors.
Minutes for the central bank’s March 15 policy meeting showed that staffers viewed no major economic recovery until next year as a worst-case scenario of the coronavirus outbreak, according to minutes released Wednesday. Fed staffers also fretted about a lack of future ammunition to combat economic distress after the central bank took unprecedented monetary-policy actions last month and slashed rates to a range of 0% to 0.25%.
Following the minutes’ release, Bob Miller, head of Americas fundamental fixed-income at BlackRock, estimated that the Fed’s “do-whatever-it-takes attitude” could swell the central bank’s balance sheet to $10 trillion in the coming year, as the Fed looks to forge a pathway to recovery.
Stocks also rose after Sanders exited the U.S. presidential race on Wednesday, opening the way for Joe Biden to become the Democratic nominee. Sanders’ candidacy has kept investors on edge over the past few months over concerns that his hostility to corporations and plans for universal health coverage could lead to increased regulatory costs and lower earnings growth.
“On the margin, having no longer any possibility of a progressive in the White House, that’s helped,” said Tony Roth, chief investment officer at Wilmington Trust, in an interview with MarketWatch.
This comes as Trump administration officials have expressed a desire to begin to reopen parts of the economy that have been shut to help limit the spread of the viral contagion that has ravaged the globe. When and what form that process takes place may be key to helping investors anticipate the economic rebound ahead.
“This week, we’re starting to see folks shift to being more hopeful that maybe the social distancing measures can be relieved sooner rather than later,” said Michael Arone, chief investment strategist at State Street Global Advisors, in an interview.
But Dr. Anthony Fauci, the expert in infectious diseases and face of the response to COVID-19 on President Donald Trump’s pandemic task force, said a path isn’t clear. “It isn’t like a light switch on and off,” he said in a podcast interview with the Wall Street Journal that aired on Tuesday.
The total death toll in the U.S. from the pandemic rose sharply to more than 12,900, according to data compiled by Johns Hopkins University. Confirmed infections in the U.S. neared 400,000, more than double the number of any other nation. Cases globally rose to more than 1.4 million, while deaths exceeded 85,000.
In New York, Gov. Andrew Cuomo said the number of deaths exceeded 6,200 and warned that fatalities will continue to rise as more patients lose their battle with the virus. “The bad news isn’t just bad. The bad news is terrible,” Cuomo said in his daily news briefing.
Pimco’s U.S. economist Tiffany Wilding warned that of the value of U.S. goods and services could plunge to negative 30% in the second quarter, while unemployment could temporarily top 20% due to the pandemic.
“Ultimately, we think the government and the central bank will do whatever it takes to limit the longer-term damage to the U.S. economy, and that the virus outbreak will eventually subside,” Wilding wrote in a blog post Wednesday. “However, in the meantime there will be some business bankruptcies and lost GDP.”
Separately, U.S. exchanges on Friday will be closed in observance of Good Friday, and those in Europe will also be closed for Easter Monday. The Passover holiday also starts Wednesday evening, which may result in lower volumes on Wall Street.
Which companies were on the move?
Caterpillar Inc. US:CAT said Wednesday that it has decided to maintain its quarterly dividend of $1.03 a share, with the next dividend payable May 20 to shareholders of record on April 20. Shares finished 4.5% higher.
Marathon Oil Corp. US:MRO shares advanced 7.3% after it announced a further cut to this year’s capital expenditures budget to $1.3 billion, half of what it spent in 2019. Energy companies have attempted to conserve cash amid worries that many would default in a backdrop of depressed crude prices.
Spirit Aerosystems Holdings Inc. US:SPR is taking a series of measures to cut costs afterBoeing Co. US:BA suspended all deliveries to its Washington state and South Carolina facilities until further notice. The company laid off 2,800 workers in its Wichita, Kansas, operations. Shares of Spirit gained 16%.
Nordstrom Inc. shares US:JWN rose 5.3% after it said it had temporarily closed all physical stores and had furloughed most of the workers.
General Motors Co. US:GM said Wednesday it is contracted to make 30,000 ventilators, at a price of $489.4 million, for the Strategic National Stockpile by the end of August. Shares added 8.6%.
Shares of FedEx Corp. US:FDX and United Parcel Service Inc. US:UPS rose after The Wall Street Journal reported that Amazon.com Inc. US:AMZN was halting its competing Amazon Shipping delivery service.
How did other markets trade?
In bond markets, the yield on the 10-year U.S. Treasury note BX:TMUBMUSD10Y rose 2.7 basis points to 0.762%.
U.S. oil prices closed higher, with the price of a barrel of West Texas Intermediate crude for May delivery US:CLK20 gaining $1.46, or 6.2%, to settle at $25.09 a barrel. In precious metals, the price of an ounce of gold for June delivery US:GCM20 tacked on 60 cents, or 0.04%, to settle at $1,684.30 an ounce.
The U.S. dollar was up 0.2% relative to a basket of trading peers, gauged by the ICE U.S. Dollar US:DXY.
In Europe, the Stoxx Europe 600 XX:SXXP finished 0.2% higher on Wednesday.
In Asia overnight, stocks closed lower. The China CSI 300 XX:000300 was off 0.5%, Hong Kong’s Hang Seng Index HK:HSI fell 1.2% and Japan’s Nikkei 225 JP:NIK rose 2.1%.
Sunny Oh contributed reporting
Source: www.marketwatch.com