The Monday Market Minute
- U.S. equity futures suggest significant opening bell gains after the Fed unveils a plan to buy unlimited amounts of government debt to confront the 'severe' conornavirus disruption.
- Global stocks slide after U.S. lawmakers fail to advance a $2 trillion coronavirus relief bill, with a possible vote later today.
- Republican lawmakers accused Democrats of being "reckless" during the coronavirus crisis, while Democrats say the bill is a "giant corporate bailout".
- Coronavirus lockdowns intensify around the world, while 1 in 3 Americans are asked to stay at home, as deaths reach 14,000 worldwide and cases spike to 341,000.
- The VIX falls to 69 points in early Monday trading, as investors look to a week of grim economic data and traders on the NYSE floor stay home amid the city's coronavirus lockdown.
- European stocks slide despite a likely German stimulus plan worth $320 billion, as Italy's death toll nears 5,500 and London edges towards a city-wide shutdown.
U.S. equity futures turned higher Monday after the Federal Reserve unveiled an historic move to support financial markets, vowing to purchase unlimited amounts of government debt to confront "severe disruptions" from the coronavirus pandemic.
"While great uncertainty remains, it has become clear that our economy will face severe disruptions," the Fed said in a statement. "Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate."
The moves lifted U.S. equity futures, which reversed earlier declines that followed political developments in Washington after lawmakers failed to approve a $2 trillion coronavirus relief bill even as one in three Americans are forced to stay home amid the escalating pandemic.
Contracts tied to the Dow Jones Industrial Average, which is on pace for its worst month since 1931, now suggest a 450 point gain to start the trading week, after earlier falling as much as 900 points after the Senate failure. Contracts linked to the S&P 500, which has lost 22% of its value over this month alone, are indicating a 55 point rebound for the broader benchmark.
Senate lawmakers were unable to push a Republican-sponsored plan, which could send checks worth around $3,000 to the vast majority of American households while pumping additional cash into the real economy, past a procedural threshold Sunday.
Democratic leader Chuck Schumer called the plan a"giant corporate bailout fund with no accountability," while Senate Majority Leader Mitch McConnell accused his political opponents of being reckless during a time of crisis.
The political deadlock in Washington, which parallels a rise in global coronavirus deaths to more than 14,000 as lockdowns in Europe and the United States continue to intensify, pounded stocks in overnight trading, while pushing investors deeper into safe-haven assets such as the dollar and U.S. Treasuries.
The selling was also accompanied by grim assessments on the economic damage the coronavirus is likely to have on the world economy, with Morgan Stanley estimating the weakest 2020 U.S. growth in nearly 75 years and Goldman Sachs warning of a deeper global recession than that seen during the aftermath of the 2008 financial crisis.
Wall Street will also have to navigate a series of economic data points this week, including jobless claims on Thursday that could spike to has high as 2.5 million, while traders stay home and exchange floors remain empty as the New York City lockdown goes into effect.
The CBOE's key volatility gauge, known as the VIX, was marked 4% lower at 69.2, and some 13 points south of its record high, meaning options traders are pricing in a 69% chance that the S&P 500 will rise or fall by 69% over the next year.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.70% lower in the session but still held at three-year highs of 102.15 as benchmark 10-year Treasury notes rallied to 0.69%.
Global oil prices were renewed pressure Monday, extending their 2020 slide into a sixth consecutive week, as investors continue slash demand forecasts for energy imports and factor-in record production targets for Saudi Arabia in the coming weeks.
Saudi Arabia, the world's second-largest producer behind the United States, is also set to pump a record 12.3 million barrels of crude each day, starting next month, following the collapse of its output limit agreement with OPEC cartel members and Russia earlier this month in Vienna.
Brent crude futures contracts for May delivery, the global benchmark, were last seen $1.55 lower from their Friday close in New York and trading at $25.43 per barrel, while WTI contracts for the same month were marked 51 cents lower at $22.12 per barrel.
Overnight in Asia, Japan's Nikkei 225 rose 2.02% on the session as investors played catch-up following that market's Friday closure, while the region-wide MSCI ex-Japan benchmark slumped 5.2% heading into the final hours of trading.