How is your heartburn? Following Black Monday 2020 that massacred global financial markets, the United States and Europe seemed ready for a bit of reprieve. It was not to be, as the 1,000-point rally was wiped out, and equities retreated into red – and then returned to green. How did everything else perform? Well, you may still need Pepto-Bismol in your back pocket if it turns out to be a weak dead-cat-bounce rally.
Bears at a Party or Bulls in a China Shop?
The Dow Jones Industrial Average fell as much as 122 points after surging 945 points. It then whipsawed 400 points. The S&P 500 dropped 0.4% after rising nearly 4%, and the Nasdaq Composite Index dipped 0.2% after climbing 3.8%. Both indexes went back up as much as 2%. U.S. bonds were resuscitated somewhat as the benchmark ten-year Treasury note rose to 0.6% – it cratered to an all-time low 0.318% during the market crash.
Across the pond, European markets were poised to settle higher, but they also wiped out all their gains. The German Dax tumbled 1.07%, the London FTSE shed 0.36%, and France’s CAC 40 market index plummeted 1.43%.
Crude oil markets rebounded, despite immense uncertainty surrounding Saudi Arabia, Russia, and OPEC. April West Texas Intermediate (WTI) crude futures advanced 6% to about $33 a barrel, while May Brent crude futures jumped more than 5% to around $36 per barrel.
The metal commodities were not performing well. Gold is down $16 to $1,659 an ounce and silver slumped $0.20 to $16.86 per ounce. Copper and platinum are flat, and palladium crashed again by $84 to $2,321 an ounce.
The exchanged-traded funds (ETFs) and the exchange-traded notes (ETNs) had started the Tuesday trading session a lot lower from their Black Monday levels. The iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) and the VelocityShares Daily 2x VIX Short Term ETN, for example, plunged and then pared nearly all their losses.
Trumponomics to the Rescue?
The news broke hours after the closing bell on Black Monday that the White House was considering a wide array of stimulus tools to prevent further declines in the stock market and to help American workers. One of the more headline-grabbing measures was a targeted payroll tax cut or relief to mitigate the economic fallout from Covid-19. Another consideration is wage relief, which would require massive federal spending for a cash-strapped government.
This would be in addition to the $8.3 billion spending package that President Donald Trump recently signed.
Champagne flowed from the heavens on Tuesday morning, but then CNBC put the cork back in the bottle when it reported that the administration is still far away from rolling out any such plan. Officials told the business news network that “it’s not there right now” and “a lot of details need to be worked out.” That said, key White House players are reportedly in agreement with these efforts.
Treasury Secretary Steven Mnuchin and chief economic adviser Larry Kudlow are slated to head to Capitol Hill this week to brief Senate Republicans on what is being discussed. Vice President Mike Pence is set to meet with health insurance executives after holding a Task Force briefing. President Trump apparently had been scheduled to meet with Republican leaders.
Democrats, meanwhile, are championing paid sick leave as part of any stimulus package.
A Dead Cat
Did the dead cat bounce run out of its nine lives already? The cat’s in the bag, and the bag’s in the river? Is the stock market manic? Is the world coming to an end?
So many thoughts and strategies are running through the minds of investors – professional and retailer – that it is impossible to make heads or tails of this market or anything else happening on this planet. Gold, a traditional safe-haven asset, is barely budging during the chaos. U.S. Treasurys could be on the cusp of slipping into subzero territory. Nearly all the Coronavirus plays are dead. Nobody knows if we are close to the bottom. Consumers are stocking up on toilet paper for some reason.
Perhaps we should just keep calm, wash our hands, and grab the popcorn instead of the Pepto-Bismol while watching former Vice President Joe Biden make gaffe after gaffe. That is the only way to maintain our sanity right now!
Read more from Andrew Moran.