Fed, U.S. Treasury Underwrite U.S. Economy And S&P 500
"Potential regime change" is how we've previously described the situation developing in U.S. markets, where in the last week, we got even more, as both the Federal Reserve and U.S. Treasury have moved to underwrite the U.S. economy, and by extension, the S&P 500 (Index: SPX). So much so that we can probably drop the word "potential" from that description.
Do check out ZeroHedge for its overview of all the changes that have taken place since the close of trading on 20 March 2020, along with what the Fed did before going on its Easter weekend holiday in the coronavirus pandemic-stricken world.
For the parts of the markets to which we pay the most attention, we find that dividend futures continued to recover, with expectations for the S&P 500's quarterly dividends per share for the rest of 2020 rebounding from their recent lows.
At the same time, the S&P 500 continued its bear market rally, rising particularly on Wednesday, 8 April 2020 actions as some positive news related to improvements in the coronavirus outbreak in the U.S. was accompanied with investor speculation on the Fed and U.S. Treasury's coming actions. Those combined actions were delivered on Thursday, 9 April 2020, which boosted stock prices further.
In the alternative futures chart, we're showing several different values for the amplification factor m from the dividend futures-based model, which has effectively gone from being a constant to a variable in the last few weeks, which potentially provides a means of quantifying the regime change taking place in the stock market.
In case you were wondering what was going on with the CME Group's FedWatch Tool, as of 9 April 2020, it was projecting the Federal Funds Rate to be in the Fed's zero-bound range (between 0% and 0.25%) through 17 March 2021. Meanwhile, here are the major market-moving headlines we noted during the Good Friday-holiday shortened trading week, where the week's biggest news came on Thursday, 9 April 2020.
Monday, 6 April 2020
- Oil prices rising, falling with Saudi-Russia oil price war negotiations:
- Bigger stimulus proving difficult to deliver. Perhaps irreversible:
- Bigger stimulus still developing in the U.S.
- Even bigger stimulus developing in Japan:
- Wall Street soars on hopes of slowing coronavirus deaths
Tuesday, 7 April 2020
- Oil drops on growing crude glut, doubts over output cuts
- Bigger stimulus developing in the U.S., proving difficult to deliver:
- Former, current Fed minions see gloom, hold U.S. consumers responsible for recovery:
- Wall Street ends lower after volatile session
Wednesday, 8 April 2020
- Oil holds near $32 ahead of OPEC-led talks on output cuts
- Bigger trouble developing all over:
- No rush for bigger stimulus in Eurozone, China stimulus running out of options:
- Fed minions having concerns for state of economy:
- Equities climb on hopes pandemic is peaking
- Actually more like rising on a stock squeeze involving very thin volumes, which takes very little to move stock prices.
Thursday, 9 April 2020
- Oil slumps, investors say OPEC supply cuts won't be enough
- Federal Reserve/U.S. Treasury commits to bigger relief:
- Fed rolls out $2.3 trillion to backstop 'Main Street,' local governments
- Fed will continue to act 'forcefully, proactively and aggressively,' Powell says
- U.S. small business rescue program gets capital and liquidity clarity, brings fintechs onboard
- Junk bond prices rally after Fed offers lifeline to riskier credits
- Fed studying if new facility for small business loans might be opened to non-bank lenders
- ECB minions reluctant to provide relief to EU economies:
- Plans taking shape for restarting closed businesses in U.S.:
- U.S. economy should be able to reopen on 'rolling basis': White House adviser Kudlow
- White House to announce economic coronavirus task force soon, senior administration official says
- Mnuchin says U.S. economy could open in May, defying experts
- Automakers push to reopen plants with testing and lots of masks
- Wall Street rises on latest Fed rescue program
What were the positives and negatives in the past week's economics and market-related news? Follow that link for Barry Ritholtz' own succinct summary of the week's notable events.
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