Futures contracts on Dow plummet 550 points as stock market investors observe an increase in cases of coronavirus; Fed offers bleak outlook for the US economy

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US stock index futures fell sharply on Thursday as investors reacted to signs of an emerging recovery in coronavirus cases and were digesting the downside outlook for the Federal Reserve’s national economy, even though the central bank has kept rates steady, as expected on Wednesday, and expected interest rates would be kept close to zero until at least 2022.
The Fed estimates that the economy should contract between 4% and 10% in 2020.

How do benchmarks work?

Futures for the Dow Jones Industrial Average
YM00,
-2.32%
YMM20,
-2.32%

down 555 points, or 2.1%, to 26,409, those of the S&P 500 index
ES00,
-1.95%
ESM20,
-1.95%

fell 54.25 points, or 1.7%, to 3,131.75, while futures on the Nasdaq-100
NQ00,
-1.52%
NQM20,
-1.52%

drops 132 points, or 1.3%, to 9,955.25.

Wednesday the Dow
DJIA,
-1.03%

fell 282.31 points, or 1%, to end at 26,989.99. The S&P 500
SPX,
-0.53%

lost 17.04 points, or 0.5%, ending at 3,190.14. The Nasdaq composite
COMP,
+ 0.66%

climbed 66.59 points, or 0.7%, to close at a record high of 10,020.35.

What drove the market?

The Fed’s policy statement and updated projections indicate that it expects a contraction of 6.5% by the end of the year, with the unemployment rate ending at 9.3%, well above the Fed’s estimate of the long-term forecast rate of 4.1%.
A SUMMARY OF THE EDF: The Fed takes stock of the economic outlook and political thinking
The market will get more information on the state of the economy when the weekly job demand report is released at 8:30 a.m. (Eastern time) and an inflation reading known as producer price index at the same time. Expectations are 1.565 million people seeking unemployment benefits for the week, according to average estimates from economists polled by Econoday.
Although new unemployment claims have been falling since March, more than 2.2 million unemployment benefit claims were filed in the last week of May as part of state and federal relief programs . This is almost as much as the 2.5 million jobs allegedly recovered by the economy over the entire month, reports Jeff Bartash of MarketWatch.
Powell said at a press conference after the Fed decision on Wednesday that he feared that the number of people who could not find jobs to return was “well in the millions”.
Market players have also expressed concern that COVID-19 derived from the new strain of coronavirus is on the rise. Bloomberg News reported on Wednesday that Johns Hopkins University data show an increase in the number of cases in Florida, Texas and California, raising concerns about a possible second wave of the pandemic, even if the overall case the country saw the smallest percentage increase since March.
The global coronavirus case count was 7.39 million on Thursday, according to data aggregated by Johns Hopkins University. The death toll is 417,022 dead. Over 3.5 million people have recovered. The United States has the highest number of cases in the world with 2 million and the highest number of deaths with 112,924.
“Until yesterday, the financial markets did not seem too concerned about the prospect of a second wave,” said Michael Hewson, chief market analyst at CMC Markets UK, in a research note Thursday. However, he noted that “the outlook seems to have focused the spirits in the wake of recent gains and send the usual travel suspects, as well as significantly lower oil and gas stocks”
Naeem Aslam, chief market analyst at AvaTrade, in a research note on Thursday, said that “the Fed’s lack of confidence in the US economic recovery also has an impact on the S & P500 futures and the feeling of risk ”.
Looking ahead, investors will also watch an update to the Fed’s balance sheet, which reached $ 7.21 trillion last week, and to the money supply at 4:30 p.m. East.

How are other assets doing?

Oil prices traded lower Thursday as the Fed promised to keep rates close to zero. West Texas Intermediate
CLN20,
-3.88%

lost $ 1.26, or 3.2%, to $ 38.34 a barrel on the New York Mercantile Exchange.
The greenback rallied 0.2% from its major rivals, as the ICE US dollar index shows
DXY,
+ 0.28%.

In precious metals, August gold
GCM20,
+ 1.32%

Comex earned $ 18.20, or 1.1%, at $ 1,738.90 an ounce.
The yield on 10-year treasury bills
TMUBMUSD10Y,
0.699%

fell 4.8 basis points to 0.70%. Bond prices move in the opposite direction of returns.
In global equities, the Stoxx Europe 600 index
SXXP,
-2.33%

closed down 0.4%, while the FTSE 100 index
UKX,
-2.26%

paid 0.1%.
In Asia, Nikkei in Japan
NIK,
-2.82%

plummeted 2.2%, the FTSE 100 index
UKX,
-2.26%

decreased 1.1%. China CSI 300
000300,
-1.08%

finished down 1.1% and the Hong Kong Hang Seng index
HSI,
-2.27%

closed 2.3%. South Korea Kospi Index
180721,
-0.86%

down 0.9%.

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