There’s not a lot of bullets left in the chamber for the Federal Reserve to deal with the next recession after a decade of easy-money monetary policy, plus more in today’s Closing Bell on Money and Markets.
The Top Story
When the next recession hits the U.S., the Federal Reserve may not be able to do much to combat it, according to Chair Jerome Powell, who testified before Congress on Tuesday and Wednesday.
While he touted the “resilient” economy, he also suggested the government may have to step in and help in the event of an economic recession.
Because interest rates are already low, Powell told members of Congress that “it would be important for fiscal policy to support the economy if it weakens.”
The Fed trimmed back rates three times last year but has held them steady between 1.5% and 1.75%.
Powell said the Fed could use quantitative easing if it’s forced to reduce short-term interest rates, but said it would not push interest rates below zero. The eurozone and Japan have used negative interest rates to spur the economy in times of recession.
“In the U.S. context, that’s not a tool we’re looking at,” Powell said, which is likely much to the chagrin of President Donald Trump, who has repeatedly called for negative rates.
Money and Markets: Closing Bell*
S&P 500: 3,379 (+21 points, +0.6%)
DOW: 29,551 (+275 points, +0.9%)
NASDAQ: 9,725 (+87 points, +0.9%)
GOLD: $1,565.70 (-$1.80, -0.1%)
BITCOIN: $10,417.57 (+$153.73, +1.5%)
U.S. 10-YEAR YIELD: 1.63%
*as of 4:27 p.m.
A Big Win
This morning, the Wall Street Wake-Up told you about the strong earnings reported by Shopify Inc. (NYSE: SHOP) — it beat analysts’ expectations by $0.19 per share. Shares gained 7.8%.
On the downside, we also told you about Lyft Inc. (Nasdaq: LYFT) reporting an earnings loss of $1.19 per share. The ride-hailing company saw its shares drop 10.1%.
M&A News
ADI Global Distribution, a subsidiary of Resideo Technologies Inc. (NYSE: REZI) is acquiring electronic repair parts manufacturer Herman ProAv. Terms of the deal were not disclosed.
Los Angeles-based private equity firm Brentwood Associates has completed its acquisition of Parchment Inc. Parchment specializes in digital credentialing for academic institutions and employers. Terms of the deal were not disclosed.
Golden Nuggets
A report from Johnson Matthey found that the palladium market was in a supply/demand deficit of more than 1 million ounces. That deficit is expected to grow in 2020.
Palladium prices have jumped over the last year and were up to $2,305 an ounce Wednesday afternoon.
Demand for palladium rose to 11.5 million ounces in 2019, up from 10.2 million in 2018. The report found that an “effort to reduce palladium consumption in the automotive industry is unlikely to prevent demand from rising in 2020.”
Gold prices slipped slightly Wednesday to $1,565.70 an ounce — down 0.1% — as investors look at risks related to the coronavirus. Silver prices also fell slightly, down $0.16 an ounce to $17.45. Platinum was off $8 to $962 an ounce.
Cannabis Corner
Canada-based Zyus Life Sciences Inc. has received licenses for research and testing to create cannabis plants.
The company, which is headquartered at the University of Saskatchewan, already received a processing license for its GMP processing facility from Health Canada.
Zyus will now be able to test cannabis and derivative products to ensure its formulations are GMP compliant.
In other cannabis-related news, Halo Labs Inc. (Over-the-Counter: AGEEF) named its former chief science officer Katharyn Field its president.
Shares of the Toronto-based company rose 4.7%.
Stock Market Update
Oil prices moved higher Wednesday as investors look for more production cuts from OPEC nations.
West Texas Crude was up 2.8% to $51.34 per barrel while Brent Crude moved up 3.5% to $55.92 per barrel.
According to the Energy Information Administration, U.S. oil stockpiles grew by 7.5 million barrels for the week ending Feb. 7. The EIA said Tuesday it expects OPEC to trim back oil production by 500,000 barrels per day.
In other news, U.S. markets moved upward after a stagnant day on Tuesday.
The Dow Jones Industrial Average rose 0.9%. The S&P 500 moved up 0.6% while the Nasdaq Composite rose 0.9%.
Today’s Big Winners:
Interpublic Group of Companies Inc. (NYSE: IPG) +7.4%
Mercadolibre Inc. (Nasdaq: MELI) +7.4%
Anthem Inc. (NYSE: ANTM) +5.7%
UnitedHealth Group Inc. (NYSE: UNH) +4.3%
Micron Technology Inc. (Nasdaq: MU) +3.5%
Today’s Big Losers:
Western Union Co. (NYSE: WU) -7.4%
Abiomed Inc. (Nasdaq: ABMD) -5%
Cerner Corp. (Nasdaq: CERN) -4.4%
Merck & Co. Inc. (NYSE: MRK) -2.3%
Travelers Companies Inc. (NYSE: TRV) -1.2%
Check back for the most important news and numbers each day after the Closing Bell, only on Money and Markets.
Don’t forget about “Marijuana Markets: a POTcast,” featuring the biggest cannabis news and investment notes from Banyan Hill’s Anthony Planas, here on Money and Markets each Saturday morning.