23 March 2020

US Stocks Close Worst Week Since 2008 Crisis

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What’s happening: US stocks closed lower on Friday to record their worst week since the financial crisis of 2008, wiping out all the gains since the election of President Donald Trump.

What happened: Markets ended a turbulent session in the red zone on Friday. The Dow climbed as much as 2.2% initially in the session but closed down 4.6% after the WHO said that healthcare systems around the world are “collapsing” due to the spread of the coronavirus pandemic.

Why it matters: Various central banks and governments around the world have been announcing different measures to provide some relief to the markets. While these moves do lift investor sentiment, the impact of the positive news has not been lasting long. The Dow and S&P are trading in a bear market and have tumbled more than 30% in a month.

The Federal Reserve disclosed eight emergency measures last week, including relief for money market mutual funds, which are typically considered a risk-free investment. The Fed’s initiatives include a bond buying program and cutting interest rates to near zero. US Treasury Secretary Steven Mnuchin also announced pushing the tax-filing deadline to July 15 from April 15 due to disruptions caused by COVID-19. On Thursday, California ordered its residents to remain at home, with Illinois declaring a similar move on Friday.

The Dow plunged more than 900 points to close at 19,174 on Friday. The S&P 500 index dropped 4.3%, bringing its weekly loss to 15% to record its worst weekly performance since 2008. The Nasdaq 100 tumbled 3.8%.

The coronavirus pandemic has affected over 339,000 people worldwide and claimed 14,700 lives, according to Johns Hopkins University. The US is now the third worst hit country, behind only China and Italy, after reporting 35,000 cases and the death toll rising to 470.

With various companies shutting their stores and cutting working hours to control costs following the coronavirus outbreak, economists are expecting a strong rise in unemployment and a steep decline in consumer spending. 

US stocks joined oil, which also delivered a terrible week, dipping below $20 per barrel during the trading session.

Why it matters: Major banks including Goldman Sachs and Deutsche Bank have warned of a US recession in the first half of 2020. Meanwhile, the Federal Reserve is expected to take some additional measures to shore up the markets. Investors are hoping for the Congress to agree on a $1 trillion package to ease the impact of the COVID-19 outbreak.

What to watch: US markets are expected to continue their downward momentum from Friday, with stock futures pointing towards a lower open today. The US economic calendar is light today, with the release of the Chicago Fed National Activity Index being the only main report scheduled.

The Markets Today

     

Crude oil will be in focus today, with prices suffering their biggest weekly loss since 1991

Context: After witnessing the largest single-day percentage gain on record, WTI crude oil closed lower on Friday, as stimulus measures from global central banks failed to lift investor sentiment. Oil prices have been hit by a steep decline in demand following the coronavirus pandemic and the price war between Saudi Arabia and Russia.

Details: Oil recorded strong losses, settling 29.3% lower for the week, following the decline in global demand due to the coronavirus pandemic. Meanwhile, the Saudi-Russian price war is expected to flood an already oversupplied oil market in April.

Oil prices continued to decline on Friday despite the biggest US oil-producing state, Texas, considering cutting its oil production. The weekly report from Baker Hughes also disclosed a weekly decline in active US oil rigs, with the oil-rig count dipping by 19 to 664.

WTI crude for April delivery plunged 11.1% to settle at $22.43 per barrel on the contract’s expiration day. WTI crude for May declined 12.7% to end at $22.63. Crude oil had jumped around 24% on Thursday, recording its biggest percentage rise on record. Brent crude for May declined 5.2% to $26.98 a barrel on Friday.

April’s heating oil declined 3.4% to $1.0063 a gallon, with natural gas losing 3% to $1.604 per million British thermal units.

What to watch: Markets will be keeping a close eye on further moves from the US to control the drop in oil prices. Investors expect the US government to intervene to ease tensions between Russia and Saudi Arabia and encourage them to reach an agreement to reduce oil production. 

Other Market: European indices were trading lower at 9:00am GMT, with the FTSE 100, German 30 and French 40 down by 4.6%, 3.9% and 4.1%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

News shaping
the markets today

     

What else to watch today

     

Canada’s wholesale sales, Brazil’s federal tax revenues and Eurozone’s consumer confidence as well as Russia’s gross domestic product.

 

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