4/8/20 Market Notes
The Dow Jones Industrial Average was off to a great start on Tuesday, rising by more than 900 points by mid-morning, before relinquishing gains to end slightly lower. Similar market moves occurred in the other major indexes, which all ended slightly lower after initially gaining as much as 4%. The notable exception was the small cap Russell 2000 index, which rose about 1/2% as investors scooped up some beaten down stocks included in the index. In spite of the headline losses, the underlying news wasn't all that bad. Six of the eleven sectors comprising the S&P 500 were higher, as a more than 1% drop in the Utilities, Technology and Consumer Staple sectors attributed to the majority of the decline. Oil prices fell 6 1/2% as Russia and Saudi Arabia continue to haggle, and gold prices retreated back below the $1,700 level, while yield crept higher.
Today's FOMC meeting notes and press conference by Fed Chairman Powell are likely to take center stage, as investors seek to get more clarity on the depth of the economic impact of this crisis and what additional tools central bankers might be contemplating to reduce the impact of the crisis.
Overnight Asian markets were mixed, while their European counterparts were lower across the board. Premarket equity futures are pointing to a higher open, but as we've seen so many times in the past few weeks, the opening and the close can look vastly different.
Looking beyond the chaos and volatility of equity markets, credit markets have been behaving a lot better and with greater stability, a sign that the Fed's actions are having their intended consequences. This is of great importance, as the impact of credit to a company and thereby its shareholders and broader economy is much more critical than the price of its stock. I liken it to income and credit score - your income might fluctuate, but is likely to return to normal levels as this crisis passes. However, should your credit score be impacted during this time, the effect of this will be long lasting. In other words, stabilizing credit markets, ensuring that there is sufficient liquidity in the system, and backstopping loans are immensely powerful tools that the Fed has deployed, and has done so with positive results.
Disclosures: This market commentary is written by the 1879 Advisors® and represents the views of 1879 Advisors®. This commentary is not investment advice and should not be used as a basis to make investment decisions. Please consult with your registered investment advisor before making any investment decisions.