Stocks drop as the Fed calls for more stimulus: to rally the markets
(Bloomberg) – Stocks fell amid warnings from Federal Reserve officials about the need for more stimulus to pull the world’s largest economy out of the recession caused by the Coronavirus. The dollar rose.
The S&P 500 index came from session lows, but remained lower on Wednesday, led by energy producers, retailers and technology companies. Fed Chairman Jerome Powell confirmed that there is a long way to go for the economic recovery, which will likely require more support. Vice Chairman Richard Clarida along with regional central bank chiefs Charles Evans and Loretta Meester also noted the importance of fiscal policy to boost the recovery. Boston Federal Reserve Chairman Eric Rosengren offered a pessimistic view of the economy’s ability to recover quickly without further assistance.
“Markets are digesting and grappling with this notion that growth expectations that may not be realized by investors may not be realized,” said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments. “As the fiscal drive in the United States begins to wane, some of these expectations have been shaken by a slow and steady recovery.”
On corporate news, Tesla Inc. pulled the Nasdaq 100 index after the “Battery Day” event was below expectations. The Dow Jones Industrial Average outperformed the strong earnings from Nike Inc. And the rise in Johnson & Johnson amid the first large US trial of a Covid-19 vaccine that may succeed after just one shot.
Here are some must-watch events this week:
Powell and Treasury Secretary Stephen Mnuchin will testify before a Senate panel on the economic response to the pandemic on Thursday, and initial U.S. jobless claims are due to be filed on Thursday.
Here are some of the major moves in the markets:
The S&P 500 is down 0.6% at 1:09 PM New York time, the Stoxx Europe 600 is up 0.6%, and the MSCI Asia Pacific Index is down 0.1%.
The Bloomberg Spot Dollar Index rose 0.4%, the Euro fell 0.2% to $ 1.1682, and the Japanese Yen slipped 0.4% to $ 105.40 for the dollar.
The yield on the 10-year Treasury gained 2 basis points to 0.69%, the yield on the 10-year Treasury was unchanged at -0.51%, and the yield on the 10-year Treasury rose 2 basis points to 0.218%.
WTI rose 0.8% to $ 40.13 a barrel, gold fell 1.8% to $ 1866.53 an ounce, and silver fell 5.5% to $ 23.06 an ounce.
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