U.S. stocks finished in bear market territory on Thursday, as anxiety about the coronavirus outbreak continued to dent investors’ sentiment. The outbreak is expected to weigh on corporate profits and disrupt supply chains. In the meantime, Fed’s move to pump trillions into the markets couldn’t provide enough confidence.
In addition, President Donald Trump and the top Republicans in the House and Senate didn’t support a wide-ranging bill from House Democrats, which further tanked hopes.
The three major indexes — the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite — closed in the red on Thursday. The Dow Jones Industrial Average closed at 21,200.62 after declining 10%, the broader S&P 500 reached 2,480.64 after decreasing 9.5% and the tech-laden Nasdaq Composite hit 7,201.80 after losing 9.4%.
In fact, the Dow Jones and S&P 500 had the worst day since the “Black Monday” crash of Oct 19, 1987 when the former declined 22.6% and the latter lost 20.5%.
The fear-gauge CBOE Volatility Index (VIX) declined 9.7% to close at 68.19 on Mar 12. Finally, decliners outnumbered advancers by a 23.77-to-1 ratio on the NYSE.
Fed to Pump $1.5 Trillion into Financial Markets
In a bid to ease the financial market’s steep sell-off, the New York Federal Reserve said on Mar 12 that it would pump trillions of dollars into the financial system. The NY Fed plans to inject at least $1.5 trillion by Mar 13. The central bank is also altering its programme of Treasury purchases “to address highly unusual disruptions in Treasury financing markets”.
The NY Fed offered $500 billion in a three-month repo operation in the afternoon of Mar 12 and then will do the same on Mar 13. In addition, the Fed said it will offer a $500 billion one-month repo operation on Friday, per CNN.
Trump, Top Republican Lawmakers Don’t Back Virus Aid Bill
On Mar 12, President Donald Trump and the top Republicans in the House and Senate didn’t support a wide-ranging bill suggested by House Democrats. The emergency meeting was held to discuss the government’s response to the fast-spreading, flu-like coronavirus.
Trump and the lawmakers discussed a wide range of policies to keep the economy afloat, in which the President indicated that his top priority is a payroll tax cut that would last till the end of 2020.
Trump rejected the coronavirus aid bill offered by House Democrats, which would include paid sick leave for those affected by the disease and expand unemployment insurance, among a range of other measures such as free coronavirus testing etc.
Speaking of economic news, U.S. producer prices fell by the most in five years in February, dragged by declines in the costs of goods such as gasoline and services. On Mar 12, the U.S. Bureau of Labor Statistics reported the Producer Price Index, which dropped 0.6% in February, after increasing 0.5% in the month before.
February’s drop in final demand prices is the biggest decline since January 2015. Prices for final demand minus foods, energy and trade services declined 0.1% in February, the first decline since shedding 0.1% in June 2019.
According to the U.S. Department of Labor, the advance figure for seasonally adjusted initial claims for the week ended March 7 was 211,000, a decline of 4,000 from for revised level of the week ended February 29. The 4-week moving average was 214,000, an increase of 1,250 from the week ended February 29’s revised average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Made Headlines
Apple Reopens China Stores After Weeks of Coronavirus-Led Closure
Apple (AAPL - Free Report) has reopened all its 42 retail stores in China after weeks of closures due to the coronavirus outbreak. (Read more)
UPS' Tome to be the Next CEO, Abney to Quit Board on Sep 30
United Parcel Service, Inc. (UPS - Free Report) has chosen Carol Tome to succeed David Abney as the new CEO, effective Jun 1. (Read more)
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