Fed Chairman Powell Warns Stimulus Withdrawal Could Jeopardise Economic Gains

European markets have opened fairly flat this morning as the rally ran out of steam amid increased fears of a second wave of infections, particularly in China and some US states. On Wednesday the S&P 500 initially made gains but fell back in afternoon trading, following spikes in coronavirus case numbers in some states that have been rapidly rolling back lockdown measures. Additionally, in a second day of testimony before lawmakers in Washington, Federal Reserve chairman Jerome Powell warned that the recent gains made by the economy could be put at risk if stimulus such as support for shut-down businesses and workers who have lost jobs is rolled back too rapidly by Congress. He noted that 25 million workers remain without employment and that “it would be a concern if Congress were to pull back from the support it’s providing too, quickly”. Lawmakers will face the challenge over the summer of how to address temporary relief measures that were set to expire. Powell said that the trillions of dollars has helped to fuel a jump in consumer spending recently, and that continued support would be required for the economy to get through “this critical phase.” Another showdown between Republicans and Democrats is coming, with the former likely to argue that keeping measures such as enhanced unemployment benefits will put people off returning to work.

 

Hertz suspends stock sale, Nasdaq in the green

Of the three major US indices, only the Nasdaq Composite was in the green on Wednesday, as technology stocks - which make up around half the index - continue to outperform the broader market. The S&P 500 was down 0.4%, while the Dow Jones Industrial Average closed the day 0.7% lower. Seven stocks in the Dow posted positive days, but none broke through the 1% daily gain threshold, while stocks including Exxon Mobil (XOM), Chevron (CVX) and Boeing (BA) all fell by more than 2.5%. The oil giants took a hit as oil prices fell due to a pickup in coronavirus cases, reigniting fears of weak demand for fuel. 

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