Stocks Tick Down, But Here’s What’s Keeping Investors Calm

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Stocks dipped Tuesday, but the move was muted and several slight positives were in the mix of information. 

All three major U.S. indexes, after having wavering between the green and red early in the morning, fell marginally Tuesday. The S&P 500 fell as much as 0.8%. 

But sentiment wasn’t totally dour and crude oil, after having fallen 6% Monday, rose 4.5%. 

First off, there are whispers of more fiscal stimulus, which Wall Street had largely agreed was in the cards. Congress may pass a roughly $600 billion in addition to the $2 trillion behemoth that is still in the early stages of working through the economy. 

"The White House is discussing additional fiscal aid measures worth $600 billion, on top of the historical $2 trillion rescue package just signed a couple of days ago,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "Huge amount of helicopter money sprayed on economies to put a floor under the growth slowdown will have long-term implications for debt levels, not only in the U.S. but everywhere in the world." 

In order for markets to stay calm longer-term, the coronavirus needs to be contained, but the stimulus has the potential to keep small businesses and households liquid for the short-term, until funds dry up and need to trickle in again. 

Elsewhere, the Chinese manufacturing PMI improved to 52 in March. A reading above 50 indicates growth year-over-year. The virus has largely left the now recovering China. 

The Federal Reserve also said it will extend its repo operations to global central banks, a move that may improve liquidity and lending abroad. In this form of financing, the Fed offers cash for short-term safe fixed-income assets and resells those assets back to the other central banks at a higher price later. 

As the worst of the U.S. economic data -- no public data has yet to encapsulate the full time period the country has been in shock -- "risk sentiment will sour again at some point in the coming days," said Jasper Lawler, head of research at London Capital Group.

Meanwhile, the move in crude oil is more of a benefit to smaller players who have higher debt burdens than larger ones. Crude oil fell 6% Monday and upon its rise Tuesday, Apache  (APA) - Get Report, Occidental  (OXY) - Get Report and Halliburton  (HAL) - Get Report rose 7.6%, 6.2% and 4.75%, respectively. 

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