Federal Reserve Chair Jerome Powell warned of extended weak economic growth, crushing the hopes of investors and sending stocks sharply downward, plus more in Wednesday’s Closing Bell on Money & Markets.
The Top Story
Powell said during a webcast it will take time for the U.S. economy to rebound from the coronavirus crash that sent the three major U.S. stock market indexes into the fastest bear market in history. He did however pledge to use the central bank’s power to stimulate (print money) the economy and financial markets as much as needed.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell said, adding he believes we’ll see a substantial recovery once the virus is under control.
One major point of news is he said the Fed will not push interest rates, already near zero, into the negative (more on that below), as traders have been betting on — and President Donald Trump has called for.
Powell’s comments sent the stock market into a tailspin, with the Dow Jones Industrial Average shedding 516 points, or 2.17%, the S&P 500 tanking 1.75% and the Nasdaq also falling 1.55%.
New York-based Levin Easterly Partners Co-Portfolio Manager Sam Hendel said that while Powell’s comments sent the stock market sharply downward, he did the right thing by being realistic.
“Powell’s doing the right thing by warning people that this is not just going to be a V-shaped recovery,” Hendel said. “I think the market may be overstating the ease of returning back to normal.”
Powell’s comments came a day after U.S. infectious diseases expert Dr. Anthony Fauci prompted a sharp sell-off of his own after he said the country could face serious repercussions if lockdowns are rolled back too soon.
“Volatility is likely to persist because there’s a lot of uncertainty on how this virus plays out,” said Brian Levitt, global market strategist for Invesco.
Stock Market Update: Closing Bell*
S&P 500: 2,820 (-1.75%)
DOW: 23,247 (-2.17%)
NASDAQ: 8,863 (-1.55%)
GOLD: $1,723.30 (+0.97%)
BITCOIN: $9,240.94 (+4.14%)
U.S. 10-YEAR YIELD: 0.649% (-0.043%)
*- as of 4:10 p.m.
A Big Win
This morning we told you to be on the lookout for Cyberark Software Ltd. (Nasdaq: CYBR) after the former information security company was the latest to withdraw it’s full-year guidance after announcing a $70 million purchase of Idaptive. Shares of CYBR fell 12.2%.
We also mentioned a rare boom for JCPenney Company Inc. (NYSE: JCP) after reports said the retailer is close to nailing down $450 million to help it navigate bankruptcy. The news sent JCP upward nearly 12%.
Golden Nuggets
While stocks hurtled downward, gold futures saw a decent jump, rising 0.97% by 4:10 p.m. EDT, upon news that Powell is ready to deploy yet more stimulus.
Silver futures rose 0.42% to $15.77, while platinum dipped 0.39% to $774.40 by the same time. Palladium was the day’s biggest loser, falling 2.03% to $1,798.20.
Cannabis Corner
As if the coronavirus hadn’t already caused enough problems, the pandemic also is forcing delays to medical and recreational cannabis launches and licensing around the U.S.
The problem? Local jurisdictions have been left scrambling to complete necessary red tape and paperwork for the programs to move forward, per Marijuana Business Daily.
Powell Maintains Negative Stance on NIRP
Powell’s comments Wednesday also seemingly slammed the door on the possibility of negative interest rate policy, or NIRP, hitting the U.S., which would wreck savers and reward borrowers.
“The committee’s view on negative rates really has not changed,” Powell said. “This is not something we’re looking at.”
Europe and Japan have both tried negative rates to stimulate their economies, but Powell said “the evidence of the effectiveness … is very mixed.”
“I know that there are fans of the policy, but for now it’s not something that we’re considering,” he said.
Today’s Big Winners
(as of 3:15 p.m. EDT)
S&P 500: BlackRock Inc. (NYSE: BLK) +6.9%
Nasdaq: Regeneron Pharmaceuticals Inc. (Nasdaq: REGN) +3.5%
Dow: Merck & Co. Inc. (NYSE: MRK) +0.91%
Today’s Big Losers
S&P 500: Coty Inc. (NYSE: COTY) -15.5%
Nasdaq: United Airlines Holdings Inc. (Nasdaq: UAL) -9%
Dow: American Express Co. (NYSE: AXP) -6.1%
Check back for the most important news and numbers each day after the Closing Bell, only on Money & Markets.
Editor’s note: Want to learn how to profit from stock market volatility and grow your money 10 times over with just two simple investments? Sign up for The 10X Switch, a free webinar with Money & Markets Chief Investment Strategist Adam O’Dell on Thursday, May 14, at 8 p.m. EDT. You’ll also receive a free copy of Adam’s report, “The Simplest Investing Strategy Ever,” just for registering. Sign up here and reserve your spot!