Before The Bell - After closing out their worst week since 2008, stocks were down again Monday, as fear of the economic fallout from the Covid-19 pandemic tightened its grip on the markets. There was a slight respite early in the day, after the Federal Reserve announced its latest moves to support the economy. These include removing its limits on repurchases of Treasuries and mortgage-backed securities, buying exchange-traded funds (ETFS) that track corporate bonds, and $300 billion in new lending programs to help support the financial markets, businesses, and consumers. However, the boost to the market was short lived. Meanwhile, the Senate’s failure to agree on a stimulus package also weighed on investor confidence. All told, it was a negative day all around, with markets closing lower in Asia, Europe, and the U.S.
On our shores, the Dow Jones Industrials ended the session down 582 points, or 3%, marking a 37% decline from its recent peak. Meanwhile, the broader S&P 500 took a 67-point hit (-2.9%) while the tech-heavy NASDAQ dropped by 18 points (0.3%). Most of the major market sectors were firmly in the red, with the heaviest losses coming in utilities (down 5.5%), financials (-4.8%), and industrials (-4.2%). Altogether, declining issues outpaced advancers by a better than three to one margin.
Elsewhere oil prices regained some lost ground, with light sweet crude up 4.6%, to about $23.65 a barrel. The commodity is down more than 55% over the past 30 days, however, reflecting declining demand and the supply war between OPEC and Russia.
As we look to the new day, stocks in Asian markets closed up sharply, and the European bourses have followed suit. Meanwhile, with President Trump suggesting “reopening” the country, and the Senate continuing to work on a stimulus plan, U.S. stock futures are pointing to a strong start for the indexes.
As it stands, with the virus continuing to spread, both the industrial and service sectors of the economy are likely to experience further weakness. However, with reports indicating that most coronavirus cases in China have recovered, and that workers there are returning to their jobs in greater numbers, there is some hope that U.S. cases may soon begin to level out. However, the economic impact is likely to linger, especially if (as some health experts are suggesting) there are additional waves of the virus. Thus, market volatility will likely remain elevated for some time. – Mario Ferro