The Dow Jones surged into Friday’s closing bell after Donald Trump declared a national emergency in the United States and previewed extensive coronavirus testing.
Stock market bulls cheered this decision, which frees up $42 billion of emergency funding for state and local governments to fight the coronavirus outbreak.
But one economist warns that consumer data will continue to sour in the months ahead. That means the stock market’s pain may not be over yet.
All three of the major U.S. stock market indices enjoyed a phenomenal rally on Friday, posting their best gains since 2008.
A massive surge in risk-appetite lifted Treasury yields, along with the U.S. dollar.
The effects of this rippled throughout markets, but not more so than in the commodity sector. The price of gold took a 4.2% haircut, falling within $25 of the important $1,500 handle. Silver was even worse, down nearly 9% as the USD surged.
Crude oil was steady, rising 4.7% after Trump asked the energy department to begin purchasing oil to add to the nation’s reserves. But the rally was muted because the strong dollar offset the brighter global outlook for consumption that followed China’s announcement that its local coronavirus outbreak is stabilizing.
Donald Trump was the primary catalyst for the rally in the Dow Jones today.
News broke early in the day that he planned to finally announce a national emergency, triggering the Stafford Act, which frees up some $42 billion of financial support for local agencies to help with the fight against COVID-19.
He further said that the White House is working to “dramatically increase the availability of” coronavirus tests.
Stock market investors loved this decision. They continue to respond positively to signs that the U.S. government is taking the global health crisis seriously.
Speaker of the House Nancy Pelosi also teased a bipartisan bill that would protect at-risk families and children, in addition to the $8 billion funding that was approved last week.
Another major push for equities was Germany’s deficit spending capitulation, something they have resisted strongly for years.
Germany’s pivot came as the WHO declared Europe the new epicenter for the coronavirus. Italy announced its largest single-day death count at 250. Global cases continue to rise at an exponential rate and are now above 125,000.
Economic data brought some surprisingly-good news for the stock market.
This was a decent dive from last month’s reading above 100, but given the damage from coronavirus, it exceeded economists’ expectations.
Unfortunately for Dow bulls, ING economist James Knightley anticipates that this fall could intensify as day-to day-life feels the squeeze from the coronavirus.
Further falls are likely for the final reading though given the roller coaster ride in equities and concern over the uncertain government response while the huge disruption containment measures imposed by employers are starting to cause to daily lives.
The cancellation of all sporting events and the long queues at grocery stores – I spent 90 minutes in Wholefoods in midtown Manhattan from 7:15am this morning just picking up a basket full of goods – is not going to bring any cheer.
That could mean the stock market will continue to suffer strong headwinds in the months ahead.
Billionaire investor Carl Icahn warned today that although stocks look “awfully cheap,” they haven’t found a bear market bottom yet.
There were strong gains all over the Dow 30 on Friday as dip buyers attacked a battered U.S. stock market.
Apple stock jumped 12%, and another of the index’s biggest stocks – Boeing – managed a sizeable 9.9% relief rally.
A big leap in Treasury yields was welcome news for Goldman Sachs and JPMorgan Chase. Both stocks rose at least 17% after an awful week of trading.
With additional reporting by Josiah Wilmoth
Last modified: March 13, 2020 8:18 PM UTC