The Wednesday Market Minute
- Global stocks slump, while the dollar pulls in investors from around the world, as trillions in stimulus fails to offset concerns over the looming world recession.
- Coronavirus infections rise to 203,500 worldwide, with 8,200 deaths, since it was first identified in early January.
- President Trump will seek a $1.2 trillion stimulus package from Congress, which could include $1,000 checks for the majority of American citizens, to blunt the coronavirus impact.
- Fed plans daily $1 trillion repos, while buying $40 billion a day in Treasury bonds, but 10-year note yields still slide to 1.2% in uneven bond market trading.
- The CBOE's VIX volatility index holds at 78 points, just shy of its all-time high, while gold tumbles 2% to trade under the $1,500 market.
- U.S. equity futures hit "limit down" levels after falling 5% in early Asia trading, while index ETFs suggest 6.5% opening bell declines for the Dow ahead of housing starts data at 8:30 am Eastern time.
U.S. equity futures slumped lower Wednesday, while stocks around the world extended declines into multi-year lows, as the prospect of trillions of dollars in stimulus from the world's biggest economies failed to overcome market concerns for a global recession from the coronavirus pandemic.
President Donald Trump will seek a $1.2 trillion aid package from Congress this week, which is expected to include business support and potentially checks of $1,000 for most American citizens, as part of its effort to cushion the economic blow that is almost certain to hit the U.S. economy in the coming months.
Japan is reported to be discussing significant stimulus for its economy, which is also being supported by trillions in liquidity from the Bank of Japan, while Britain unveiled a near $500 billion package of loan guarantees yesterday. European leaders, as well, as said to be mulling a similar-sized effort to soothe recession concerns in the world's biggest economic bloc.
The collective stimulus plans, however, weren't enough to keep U.S. equity futures from hitting "limit down" levels in overnight trading, with prices frozen after falling 5% in early Asia dealing.
Contracts tied to the Dow Jones Industrial Average now indicate a 1,031.38 point opening bell decline, a move that would erase all of yesterday's gains, while those linked to the S&P 500 suggest a 121 point pullback for the broader benchmark.
Pre-market trading in the main SPDR S&P 500 ETF (SPY) - Get Report, however, continues, with the biggest passive investment vehicle falling 6.2% to indicate an opening bell price of $237.21 each. The SPDR Dow Jones Industrial Average ETF (DIA) - Get Report, meanwhile, was last seen 6.7% lower at $199.20 each.
The CBOE's key volatility gauge, known as the VIX, was marked 8.2% lower a 75.91, meaning options traders are pricing in a 76% chance that the S&P 500 will rise or fall by 76% over the next year -- around 6 points shy of the all-time high recorded in Monday's historic session.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was holding onto gains in early European trading and changing hands at 99.60, while gold tumbled 2.34% to $1,492.30 per ounce as investor liquidated positions in other markets as global stocks continue to slump.
Global fund managers, in fact, are pricing in the biggest change in corporate earnings prospects on record, BofA's closely-watched survey indicated Tuesday, with overall sentiment falling to the "bear extremes" of the global financial crisis.
Central banks, too, are acting with similar echoes to the 2008 crisis, with the Federal Reserve moving to backstop commercial paper markets yesterday, a key $1 trillion component of inter-bank lending markets, and will offer $1 trillion in daily liquidity injections, via the repo markets, each day until the end of the week.
European stocks were also deeply in the red after the first two hours of trading in Frankfurt and London, with the Stoxx 600 falling 4.6% and the FTSE 100 slumping 5.25% even as the pound, which typically moves in the opposite direction of stocks, fell to 1.1988 against the U.S. dollar.
Global oil markets failed to find a bid Wednesday, as well, even after a surprise dip in U.S. inventories last night, with traders continuing to cite a grim demand picture, and the prospect of record-high production from Saudi Arabia, in keeping prices pinned to the $30 per barrel mark.
Brent crude futures contracts for May delivery, the global benchmark, were last seen $1.01 lower from their Monday close in New York and trading at $27.72 per barrel, while WTI contracts for April delivery were marked $1.73 lower at $25.22 per barrel.
Overnight in Asia, Wall Street's late-afternoon rally failed to provide traction for regional stocks, with safe-haven buying into the yen pushing the Nikkei 225 1.68% lower on the session at 16,726.55 points and the MSCI ex-Japan benchmark falling 3.8% into the close of trading.