HomeU.S. stock markets climb after coronavirus panic causes massive sell-offTechU.S. stock markets climb after coronavirus panic causes massive sell-off

U.S. stock markets climb after coronavirus panic causes massive sell-off

”The prospect of some sort of stimulus is a positive ray of light,” said Sarat Sethi of Douglas C. Lane & Associates. “The government is acknowledging the coronavirus and dealing with it. That is removing some of the uncertainty and giving investors relief.”

After weeks of turbulence, U.S. markets plunged to new depths Monday, cratering more than 7 percent on the dual threat of the outbreak’s spread in the United States and the oil price war that erupted between Russia and Saudi Arabia over production targets. Reuters reported Tuesday that Saudi Aramco planned to raise output to 12.3 million barrels per day in April, flooding crude markets further and threatening U.S. shale producers. In turn, this could negatively affect oil-producing states and make it more difficult for the domestic economy to heal.

“Markets are trying to force a policy response — from central banks and from Washington D.C. A basket of more aggressive monetary policy action is coming and how markets respond is the big question,” said David Bahnsen, chief investment officer of the Bahnsen Group, wrote in commentary Monday. “The market will get something resembling “zero bound” very soon, but that is not likely to be effective.”

Overseas markets also saw a bounce Tuesday, with Japan’s Nikkei 225 closing up 0.85 percent and Hong Kong’s Hang Seng climbing 1.4 percent.

Oil prices, which sank 25 percent on Monday to their lowest trading levels since the 1991 Gulf War, bounced back, too. Brent crude, the international oil benchmark, was up more than 7.3 percent to nearly $37 a barrel.

Frank Verrastro, senior vice president at the Center for Strategic and International Studies, said the miscalculation between the Saudis and Russians has blunted not only the price of oil but global financial markets.

Some analysts have even speculated the oil prices could reach single digits, which would decimate not only the U.S. shale oil industry, but would have far-reaching effects on producing countries that cannot survive without healthy per barrel prices in the $50, $60 or higher range.

“Egos and miscalculations can lead to a much larger and adverse economic impact if it’s not corrected,” Verrastro said, adding that the turmoil in oil markets is broad and deep. “Markets don’t like uncertainty, and that’s what is going on today.

“Pretty soon, these oil companies are going to have to report first-quarter earnings,” Verrastro said. “That could jeopardize outstanding bank loans. Then there are unemployment impacts, truckers and tankers are not moving oil. Prices on airlines are down, but no one is flying. We are going to need some signal that Russia and Saudi Arabia can resolve this before things get better.”

The outbreak continues to spread at a rapid clip with more than 113,000 cases worldwide. The director of the World Health Organization called the threat of a coronavirus pandemic “very real.” More than 700 cases have been confirmed in the United States, with the virus present in more than 30 states. The outbreak is responsible for thousands of deaths, including 26 in the United States,

Italy began a nationwide lockdown Tuesday, in a drastic attempt to contain its outbreak that will also upend the lives of 60 million inhabitants. Israel has instituted a quarantine for all arriving travelers, and Japan is moving closer to declaring a national emergency. But as the virus’ grip on Europe and the United States tightens, China is touting its containment practices, with leader Xi Jinping visiting the city of Wuhan for the first time since the virus emerged there late last year.

“The biggest fear investors have right now is that this sell-off is different than others,” Nancy Davis, chief investment officer of Quadratic Capital, said in commentary Monday. “It isn’t clear to me that any amount of rate cuts or quantitative easing will have much of an effect when the underlying issue is health-related.”

Markets weren’t remotely appeased after the Federal Reserve delivered its first emergency rate cut since the financial crisis last week. The emergency measures seemed to reinforce investor panic rather than quelling it.

“We continue to see the market get whipped around as it searches and thrashes looking for some stability,” said Kenny Polcari of SlateStone Wealth. “Though, do not expect the market to rally straight up from here after the beating it has taken over the past two weeks. Until we get clarity on both the virus and on what the Saudis and the Russians want to do with oil, expect the markets to remain volatile. ”

The yield on the 10-year Treasury note, a staple of global finance, remained below 1 percent, although it had climbed from record lows. The yield on the bond is increasing because investors are fleeing stocks for the safety of U.S. federal debt, which is presumed to be among the safest investments on the planet. As bond prices rise due to demand, yield correspondingly falls.

Financial managers urged their clients to look past the current financial maelstrom and instead fix their gaze a decade down the road.

“Investors need to change their mind-set from thinking about the next few weeks to thinking about five to 10 years from now,” said Clark Kendall, president of Kendall Capital in Rockville, Md., “Do you want to own 10-year Treasurys with a yield below 0.5 percent? In ten years, a dollar will only be worth less than $1.05. At this time, it is most important to own financially strong companies that can weather this virus. Just like humans, it is the physically and financial weak that are most at risk. ”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

payday smile logo

PaydaySmile.com is a financial technology company specializing in payday loans and financial solutions. With a keen focus on catering to payday lending needs, the company provides tailored loan options and tools to assist individuals seeking short-term financial assistance. It’s important to note that while we offer financial tools and resources, we are not a direct lender.

Advertiser Disclosure: This website is an independent, advertising-supported comparison service. The card offers that appear on this site are from companies from which this website receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). This website does not include all card companies or all card offers available in the marketplace. This website may use other proprietary factors to impact card offer listings on the website such as consumer selection or the likelihood of the applicant’s credit approval.

© 2024 PaydaySmile.com . All Rights Reserved.