Equities Claw Back From Session Lows on Fed Action: Markets Wrap - Yahoo Finance

(Bloomberg) -- U.S. stocks clawed back some early losses as investors awaited progress on a spending package from Congress to tackle the economic fallout from the virus. Measures of corporate credit risk eased and the dollar fell after the Federal Reserve announced a massive second wave of initiatives to support a shuttered American economy.

The S&P 500 recovered from session lows following a sharp drop at the open Monday after Congress failed to agree on a stimulus bill. Republicans continued to negotiate the deal after Democrats blocked the first effort. The index has now erased almost all gains during Donald Trump’s presidency. The Nasdaq 100 gained.

“Fiscal is far more important than the Fed in stabilizing risk assets,” said Dennis DeBusschere of Evercore ISI. “That being said, as the Fed gets more creative, they can become much more relevant. They are going to buy everything.”

The central bank said it will buy an unlimited amount of bonds to keep borrowing costs low and will set up programs to ensure credit flows to corporations and state and local governments. Spreads on credit default swaps tightened and bond ETFs eligible for Fed purchases rallied.

“It is good to see the Fed doing absolutely anything they can,” Rick Bensignor, the founder of Bensignor Group and a former strategist for Morgan Stanley, told Bloomberg Television. “To me, the question becomes and has continuously been, what is it going to take to change the psyche of the market? Because you’re dealing much more with fear now than anything rational.”

The Stoxx Europe 600 fell as the continent’s leaders scrambled to enforce more curbs on people’s movements and Italy began shutting most industrial production. Core European bonds climbed. Equities fell earlier across most of Asia, where India’s benchmark plunged a record 13% while the rupee sank to the lowest ever amid moves to lock down widespread areas of the country. Brent crude extended losses after its 20% decline last week, while West Texas crude was up.

Investors are beginning another dramatic week digesting slashed economic forecasts and news of Europeans struggling to curb the pandemic, with Italy and Spain reporting 2,000 deaths over the weekend between them. Warnings grew that a global recession is coming as cities from New York to Los Angeles all but shut down and cases rise rapidly outside Asia.

Before the Fed news, focus had been on the main American political parties failing to agree on a quick jolt to the sinking economy with a $2 trillion stimulus. Morgan Stanley warned the epidemic could cause U.S. GDP to shrink a record 30% in the second quarter. Federal Reserve Bank of St. Louis President James Bullard said the country’s jobless rate may hit 30% and growth could even halve to $2.5 trillion during the three-month period.

Meanwhile, international air carriers continued to announce drastic measures to cope with the outbreak, with giants Emirates and Singapore Airlines Ltd. among the latest to slash flights, and jet maker Airbus SE withdrawing its earnings guidance.

Elsewhere, New Zealand’s dollar earlier fell with the country’s bond yields after its central bank joined other countries in saying it will start buying bonds to stimulate the economy, though the kiwi recovered after the Fed announcement.

Here are the main moves in the market:

Stocks

The S&P 500 Index fell 1.5% as of 10:08 a.m. in New York.The Nasdaq 100 rose 0.3%.The Stoxx Europe 600 Index decreased 2.9%.The MSCI Asia Pacific Index dipped 3.2%.

Currencies

The Bloomberg Dollar Spot Index dipped 0.4%.The euro gained 1% to $1.0799.The British pound rose 0.12% to $1.1643.The Japanese yen increased 0.3% to 110.62 per dollar.

Bonds

The yield on 10-year Treasuries declined nine basis points to 0.75%.Germany’s 10-year yield fell five basis points to -0.37%.Britain’s 10-year yield decreased 10 basis points to 0.465%.

Commodities

West Texas Intermediate crude rose 0.4% to $22.70 a barrel.Gold climbed 1.8% to $1,526.02 an ounce.

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2020-03-23 14:14:00Z
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