Tuesday, June 9, 2020

S&P 500 Wipes Out Covid-19 Losses Ahead of Fed Meeting

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News shaping
the markets today

     

What’s happening: The S&P 500 has recovered all its losses from the coronavirus-induced sell-off in March.

What happened: US stocks and stock index futures extended last week’s rally, surging again on Monday amid growing optimism around an economic recovery due to an upbeat payrolls report.

The rally helped the S&P 500 index swing to positive territory for the year and the Nasdaq 100 reach a record high on Monday. While the Federal Reserve disclosed various steps to ease the pressure on markets, the National Bureau of Economic Research made some announcements suggesting the rally may end soon.

Why it matters: US stocks had tumbled in March due to lockdowns imposed by the government to control the pandemic. The S&P 500 shed around 30%, while the Nasdaq index dropped 25%. Indices trading has recently made a remarkable comeback, with the major indices recording consecutive monthly gains.

One of the major factors that has helped stock and forex trading deliver strong gains is the extraordinary intervention by the US Federal Reserve to support the economy, injecting as much as $3 trillion into the markets since February.

The Fed expanded its Main Street Lending Program on Monday to allow more businesses to receive support from the government. The central bank reduced the minimum amount for loans, raised the maximum loan limit and extended the term period.

Markets shrugged off news of civil unrest in various parts of the country to post strong gains. Investors were also optimistic about the reopening efforts by all US states, with New York City announcing the first phase of its reopening plan yesterday.

Amid this upturn, the announcement by NBER (National Bureau of Economic Research) came as a dampener. The organisation said that the US economy had entered into recession in February, marketing an end to the country’s longest period of growth.

Despite this, stock index futures continued their upturn. The S&P 500 gained 1.2% to close at 3,232.39, while the Nasdaq 100 climbed 1.1% to end at 9,924.74, a record closing for the tech-heavy index. The Dow Jones index also closed higher for the sixth consecutive session, rising 1.7% to end at 27,572.44.

Airline stocks delivered strong gains on Monday, with the US Global Jets fund climbing 9.2% and shares of Boeing surging more than 12%. Oil-related stocks also gained significantly, with Chesapeake Energy’s stock spiking more than 180% and Noble Energy’s stock rising around 13% in the previous session.

What to watch: Investors will be keeping an eye on the Federal Reserve’s next move, with the central bank expected to release its policy decision on Wednesday. The Fed is also expected to release economic projections, but is unlikely to lower interest rates.

US stocks are expected to open flat today, with the stock index futures trading mostly unchanged this morning. Markets also await a basket of economic reports from the country, including the NFIB small business optimism index, Redbook index, wholesale inventories, job openings and IBD/TIPP economic optimism index.

The Markets Today

     

The Australian dollar will be in focus today, after the currency retreated from its six-month high versus the greenback.

Context: After posting a rise in the Asian session, the Aussie pared some of its gains to retreat from its multi-month highs as China's education ministry issued a travel warning to its students in Australian universities.

Details: China's Ministry of Education warned its students to carefully plan their travel to Australia, as the country announced plans of reopening its major universities around July.

Currency market sentiment was supported by an improvement in the National Australia Bank's (NAB) index of business confidence to -20 in May, from -46 in April, beating the consensus expectations of -32. NAB economist Alan Oster said that a recovery in confidence could be key in “how businesses recover from the largest downturn since the 1930s.”

Australia's job advertisements increased 0.5% to 63,428 in May, after witnessing the biggest decline on record in April.

Amid high volume forex trading, the Aussie fell around 1% to 0.69507 versus the US dollar, down from its six-month highs of 0.70417 in the European session on Tuesday.

What to watch: Traders will be monitoring the tensions between China and Australia following the travel warning from Beijing. Markets will also look forward to the release of the consumer sentiment index scheduled for tomorrow. Traders will keep an eye on the outcome of the US Federal Reserve meeting.

Other Markets: European indices were trading lower at 8:30 am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.4%, 0.3% and 0.7%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Mexico’s inflation rate as well as the US API crude oil stock change data.