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Dow Futures Leap after Trump Scolds Fed’s ‘Big Rate Cut’ Failure

Last Updated September 23, 2020 1:37 PM
Ben Brown
Last Updated September 23, 2020 1:37 PM
  • The U.S. stock market looks set to extend yesterday’s record-breaking recovery.
  • Trump twisted the Fed’s arm, urging Powell to support the economy in the wake of coronavirus panic.
  • But a G7 statement today is expected to stop short of recommending co-ordinated easing attempts.

The Dow Jones notched up its biggest one-day points gain in history yesterday. And despite calls of a dead cat bounce, the momentum isn’t slowing yet. Dow Jones Industrial Average (DJIA) futures are up 270 points this morning.

The move upward comes as Trump twists the arm of the Federal Reserve. In the early hours of Tuesday, he urged chairman Jerome Powell to ease monetary policy  and “cut big” to support the economy.

[The Federal Reserve] should ease and cut rate big. Jerome Powell led Federal Reserve has called it wrong from day one. Sad!

Trump tweet Federal Reserve 

Trump tweet Federal Reserve 

Dow futures up 279 points

Dow Jones futures contracts  ripped higher on Tuesday morning, up 279 points at 5.54 am ET.

Dow jones DJIA stock market futures chart
Dow Jones Industrial Average (DJIA) futures ripped almost 300 points higher. Source: Yahoo Finance

S&P 500 future s and Nasdaq Composite futures  were up 0.93% and 1.11% respectively.

Federal Reserve cuts to boost stock market?

Trump has routinely put pressure on the Federal Reserve to cut rates – a move he believes would boost the U.S. stock market .

If [Powell] did nothing, or perhaps even loosened, [the Dow Jones] would be in my opinion, just an opinion, 10,000 points higher than already a very high number.

Although the Fed is independent, Trump’s continuous pressure makes it more likely that the Fed will act. Goldman Sachs analysts now expect a 50 basis point cut in March  and a total 100 basis point cut by the end of the year.

Trump angry as other nations load the stimulus canon

Trump’s anger comes as central banks around the world prepare for another wave of monetary easing. Overnight, the Australian central bank announced it would cut interest rates to a record low in the wake of the coronavirus. Trump responded:

Australia’s Central Bank cut interest rates and stated it will most likely further ease in order to make up for China’s Coronavirus situation and slowdown… Our Federal Reserve has us paying higher rates than many others, when we should be paying less.

The European Central Bank, Bank of Japan, Bank of England and even the Fed have all said they would act as appropriate to support the economy. Although financial markets cheered the news, some analysts say rate cuts won’t stem the bleeding.

Dow Jones awaits G-7 statement

More clues will arrive this morning in the form of a G-7 statement . It’s expected to outline a plan to soften the coronavirus blow to the economy.

The G7 are reportedly hesitating on coordinated central bank rate cuts to soften the economic impact of the coronavirus outbreak. | Source: Johannes EISELE / AFP

But traders expecting a co-ordinated easing plan may be disappointed. According to Reuters, the statement does not contain any plans for co-ordinated central bank cuts or government fiscal policy.

At this stage, I don’t think the G-7 are willing to show their stimulus hand and are holding back the fiscal cannons for a later date once they can better quantify the supply-side shock from Covid19 – Stephen Innes, chief market strategist at AxiCorp.

Jerome Powell and Treasury Secretary Steven Mnuching are expected to lead the G-7 conference call on Tuesday morning ahead of the release of the statement.

Coronavirus latest

The number of new COVID-19 cases in China are falling, but accelerating elsewhere in the world. Confirmed cases in South Korea reached almost 5,000  as the country declared “war” on the coronavirus.

The World Health Organization said the world is now in ‘uncharted territory’ as confirmed cases in Italy – the epicentre of Europe’s outbreak – soared to 1,835. The true scale of the virus remains difficult to quantify as the fatality rate continues to fluctuate from region to region.

A total of six have now died in the U.S. and there are concerns that the CDC is covering up the true scale of the outbreak .