Tuesday March 24th

24-03-2020

Dow futures surge 900 points, hit ‘limit up’ on optimism a coronavirus rescue bill is close

U.S. stock index futures surged in early trading Tuesday on hopes an agreement on a stimulus bill to rescue the economy from the coronavirus was close. As of 8:14 a.m ET, Dow Jones Industrial Average futures jumped 930 points, or 5%, and briefly hit so-called limit up levels. S&P 500 futures and Nasdaq futures were also up 5% and reached “limit up.” The S&P 500 SPDR ETF was up 4.9% in premarket trading. Senator Charles Schumer and Treasury Secretary Steven Mnuchin said they hope to have a deal by Tuesday morning. “There are still a few little differences. Neither of us think they are in any way going to get in the way of a final agreement,” Schumer said. The futures contracts cannot trade once they exceed certain extreme bands, according to rules of the exchange to curb volatility. No activity can take place outside of those bands, in this case, up 5%. During this historic market plunge this month, the futures have often been halted for being “limit down,” off by more than 5%. Tuesday’s moves followed yet another stormy day on Monday as investors swung back to pessimism and pushed the major indexes to new multiyear lows as a procedural vote in the Senate on a bill failed for the second time in 24 hours. The Dow dropped 582.05 points, or 3%, to a new three-year low on Monday and remained on pace to clinch its worst calendar month since 1931. The S&P 500 dropped 2.9% to 2,237 and closed 34% below a record set last month as both indexes sank further into bear markets amid the COVID-19 outbreak. “The recent disorderly market action has left scars on most money managers,” said Sean Darby, global equity strategist, in a note. “Bear markets are brutal and they typically presage a recession.” Stocks hardest hit by the shutdowns resulting from the coronavirus led the gains in premarket trading Tuesday. Shares of Wynn and MGM Resorts were both up more than 10%. Delta Air Lines jumped more than 14%. General Motors shares, meanwhile, climbed nearly 6% after the automaker announced it will keep its dividend. Democrats have criticized the $500 billion fund that the Republican proposal sets aside for distressed businesses, calling it a bailout fund “with no strings attached.” “I think the limit of time as to how long these negotiations will go on, will be set by the initial unemployment claims that come out on Thursday,” Steven Ricchiuto, chief U.S. economist at Mizuho Securities, told CNBC’s “Squawk Box Asia” on Tuesday morning Singapore time. “I don’t think there’s any representative in the House or … in the Senate who’s gonna be willing to sit back and debate a lot of issues … and political talking points when you have what could be essentially as many as 3 million people filing for unemployment insurance,” Ricchuito said. The futures’ gains also came as President Donald Trump signaled he was eager to reopen the economy, despite concerns of public health officials. “At some point we’re going to open up our country, and it will be fairly soon,” Trump said during an evening press briefing on the fast-spreading virus. Markets are getting support from the Federal Reserve, which said Monday it would embark on an open-ended asset purchase program. The central bank said the program will run in the “amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.” “This market has been utterly dangerous since February,” wrote Fundstrat’s Tom Lee in a note Tuesday. “But there are glimmers of hope.” The spread of the coronavirus also forced the New York Stock Exchange to conduct its first day of fully electronic trading. The exchange said last week that two people tested positive for the disease at screenings it conducted this week. Stocks in Asia jumped on Tuesday as authorities ramped up stimulus measures to combat the economic impact of the global coronavirus outbreak. Japan’s Nikkei 225 was among the region’s major markets that the saw the largest increase. It  surged 7.13% by the close to 18,092.35, while the Topix rose 3.18% to end its trading day at 1,333.10. In South Korea, the Kospi rose 8.6% to close at 1,609.97. Hong Kong’s Hang Seng index also jumped 4.25%, as of its final hour of trading. Mainland Chinese stocks also saw gains on the day, with the Shanghai composite up 2.34% to about 2,722.44 while the Shenzhen composite added 2.105% to around 1,666.22. Oil prices rose on Tuesday on hopes that the United States will soon reach a deal on a $2 trillion coronavirus aid package that could blunt the economic impact of the outbreak and in turn support oil demand. Brent crude oil futures for May delivery rose by 67 cents, or 2.5%, to trade at $27.70 per barrel, while West Texas Intermediate crude futures gained 52 cents to trade at $23.88 per barrel. “Oil is clawing its way higher, mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” said Edward Moya, senior market analyst at broker OANDA. Gold rose 3% on Tuesday, extending gains from a near 4% surge in the previous session, after the U.S. Federal Reserve’s unprecedented measures to help an economy reeling from the coronavirus pandemic halted a rush for cash. Spot gold rose 3.3% to $1,604.45 per ounce. The metal rose 3.7% on Monday, its highest percentage gain since June 2016. U.S. gold futures climbed 5.1% to $1,648.70.