Stocks erased earlier losses and rose Monday, after the Federal Reserve
said it would begin purchasing individual corporate bonds as part of its emerging lending program to inject liquidity into the virus-stricken economy.
Earlier
in the session, the Dow was off as many as 762 points, or 3%, as
investor jitters over rising coronavirus cases in key parts of the
country stirred up an extension of last week’s pullback in equities.
Last week, stocks posted their first weekly loss in a month, with a
steep selloff on Thursday
comprising much of the weekly decline. The plunge, which came on the
heels of a more than 40% run-up in the S&P 500 since March, came
after new data showed rising coronavirus case and hospitalization counts
in states that were among the first to reopen businesses, and after the
Federal Reserve last week delivered a grim forecast for near-term
economic activity.
Market
participants continued to eye coronavirus cases across the country for
signs of resurgences. New cases in the densely populated state of
Florida grew faster than the past week’s average as of Sunday’s tally,
according to Bloomberg data, and
Washington State Department of Health issued a report warning of statewide increases in the virus.
In
New York, the daily coronavirus death toll came in at 23 as of Sunday,
or the lowest since the pandemic began and well below the near 800 per
day at the outbreak’s peak in early April. Governor Andrew Cuomo,
however,
flagged that more than 25,000 complaints
had been filed over violations of social distancing standards, and
Cuomo warned he would tighten restrictions if businesses and individuals
did not comply with the phased reopening process.
Still,
some analysts maintained that geographies that have been slower to
reopen including the Northeast, were less at risk of a renewed flare-up
in cases, given their more protracted original lockdowns.
“We
are not worried that the renewed lockdowns we expect in parts of
Arizona, Texas, the Carolinas, Arkansas, and perhaps others, will be
required elsewhere,” Ian Shepherdson, chief economist for Pantheon
Macroeconomics, said in a note. “Far more people have been sick in the
densely populated Northeast and Midwest than in most of the South, and
lockdowns in major cities have been very long and painful.”
“Accordingly,
we’re expecting people in the Northeast and Midwest to be much more
cautious about maintaining social distancing, and to be more willing to
wear masks in stores, on public transportation and at leisure
facilities,” he added.
Meanwhile, White House economic director
Larry Kudlow during CNN’s “State of the Union”
on Sunday downplayed economic concerns posed by potential new waves of
the coronavirus, saying, “There’s a very good chance you are going to
get the V-shaped recovery,” and asserting growth would pick back up in
the second half of the year. The remarks contrasted with some of the
more cautionary outlooks from officials
including Federal Reserve Chair Jerome Powell, who last week underscored the ongoing uncertainty created by the pandemic.
Kudlow
also said the current $600-per-week unemployment payment paid out to
some Americans who had lost their jobs during the pandemic as part of
Washington’s sweeping coronavirus relief plan would end on schedule at
the end of July, calling the program “a disincentive” for people to
return to work.
Later this week, market participants are poised to receive
new economic data on the retail trade and manufacturing sectors, which many economists believe will affirm an at least slight pick-up in activity from the doldrums of April.
Stocks
rose and the Dow added more than 200 points, after the Federal Reserve
said it will purchase individual corporate bonds that meet their
criteria under the central bank’s Secondary Market Corporate Credit
Facility. Previously, the Fed had been purchasing just exchange-traded
funds under this facility.
The
new program will include an index “made up of all the bonds in the
secondary market that have been issued by U.S. companies that satisfy
the facility’s minimum rating, maximum maturity, and other criteria.
This indexing approach will complement the facility’s current purchases
of exchange-traded funds,” the
Fed said in a statement.
