Wednesday April 8th

8-04-2020

Dow futures jump more than 200 points after Tuesday’s wild ride

U.S. stock index futures pointed to a slightly higher open on Wednesday amid hope that the number of new coronavirus cases is starting to decline. At around 8:55 a.m. ET, Dow Jones Industrial Average futures were 217 points higher, indicating an opening gain of 163 points. S&P 500 and Nasdaq 100 futures also pointed to a higher open. In the U.S., the number of daily increases in coronavirus cases has fallen since Friday, according to data from Johns Hopkins University. Daily increases in global cases have also fallen since then. “If the curve is bending, for the first time, some time-line is coming into focus for restarting at least parts of the economy,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “This means investors can start to reduce their best guesses as to how long this recession will last and even if the recession is very deep, if its duration can be shortened and known with some greater clarity, this would tend to raise the value of the stock market.” Stocks pressured by the coronavirus outbreak rose in the premarket. Carnival, Norwegian Cruise Line and Royal Caribbean all advanced at least 2.7%. MGM Resorts gained 3.8% while Wynn Resorts climbed 2.7%. American led airline stocks higher with a 5.1% jump. United and Delta traded higher by 4.9% and 3.6%, respectively. However, some investors believe equities were getting ahead of the reality where coronavirus shutdowns are likely to weigh on the economy significantly beyond the second quarter. The major averages have rallied about 20% from their March 23 lows. The uncertainty around the coronavirus has also pressured corporate earnings estimates. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, thinks they could fall even more. “We are still in the early innings of downward EPS revisions,” Calvasina wrote in a note to clients. “Further downward revisions could keep equity market conditions choppy for the time being.” On Tuesday, the Dow Jones Industrial Average fell 26 points or 0.1%, giving up a 900-point surge from earlier in the day. The Federal Open Market Committee is set to publish its meeting minutes from its March meeting.  In an emergency decision ahead of that meeting, the Fed cut interest rates to zero, for the first time since the financial crisis. Although the Fed’s minutes shouldn’t be market moving, investors will get some insight into what the central bank is using as justification for its historic easing measures. Stocks in Asia Pacific were mixed on Wednesday as countries in the region continued to put measures in place to battle the coronavirus pandemic. In Japan, stocks saw a turnaround after an earlier slip, with the Nikkei 225 rising 2.13% to close at 19,353.24. The Topix index also gained 1.59% to end its trading day at 1,425.47. Mainland Chinese stocks dipped on the day, with the Shanghai composite down 0.19% to about 2,815.37 while the Shenzhen composite slipped 0.156% to around 1,740.65. Hong Kong’s Hang Seng index also shed 1.29%, as of its final hour of trading. Over in South Korea, the Kospi closed 0.9% lower at 1,807.14. Oil steadied near $32 a barrel on Wednesday, supported by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have collapsed due to the coronavirus pandemic. Thursday’s videoconference meeting between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia is expected to be more successful than their gathering in March, which ended in a failure to extend supply cuts and a price war between Saudi Arabia and Russia. “The coming extraordinary producing-countries meeting is the only hope on the horizon for the market,” said Bjornar Tonhaugen of Rystad Energy. “Nobody wants to go short ahead of what could be a ‘positive surprise’ by OPEC++.” Brent crude gained 9 cents to trade at $31.93 per barrel, after falling 3.6% on Tuesday. U.S. West Texas Intermediate crude rose 78 cents, or 3.3%, to trade at $24.42 per barrel. Gold edged lower on Wednesday as the rising coronavirus death toll hammered risk sentiment, while investors await the release of the U.S. Federal Reserve’s policy meeting minutes for clues on further stimulus measures. Spot gold ticked down 0.16% to $1,645.40 per ounce, after climbing to its highest since March 10 on Tuesday, at $1,671.40.