Traders, some in medical masks, work on the floor of the New York Stock Exchange (NYSE) on March 20, 2020 in New York City. Floor trading will temporarily become fully electronic starting Monday to protect employees from the spread of coronavirus. The Dow fell more than 500 points on Friday as investors continue to show concern for COVID-19.
Spencer Platt | Getty Images
US equity futures plummeted again on Sunday night as Wall Street waits for Washington to agree on an economic stimulus and a bailout to combat the giant economic blow from the coronavirus epidemic.
Dow Jones Industrial Average futures fell by over 900 points, or 5%, to reach their limit down level. The S&P 500 and Nasdaq-100 futures also fell by around 5%. The downward limits of futures contracts are implemented to ensure orderly market behavior once trading reaches a certain threshold. Exchanges below this level are not allowed.
US crude oil futures fell by more than 6%, adding up to the huge losses last week and heightening concerns over financial market pain on Monday.
A fiscal stimulus bill failed a Senate key procedural vote on Sunday as Democrats warned that the measure had not done enough to help workers and too much to save businesses. Earlier, spokeswoman Nancy Pelosi had reported that she disagreed with the Republican version of the stimulus plan, saying: “From my point of view, we are separated.”
However, Senate minority leader Chuck Schumer, D-NY, said the disagreements over the bill could be overcome in the next 24 hours.
National Economic Council director Larry Kudlow said on Saturday that a package of economic stimuli will amount to over $ 2 trillion, noting that it will account for about 10% of US economic output. Last week, President Donald Trump signed a $ 100 billion bill that expanded paid leave in the United States.
Treasury Secretary Steven Mnuchin said Sunday that funding programs to boost the economy could be worth $ 4 trillion, noting that these efforts will include coordination with the Federal Reserve to provide businesses with the necessary liquidity.
“When it started, this was a bit unique for the airline industry since we had closed most air travel,” said Mnuchin. “This liquidity structure is a broad-based liquidity structure that works with the Fed.”
David Kostin, chief equity strategist of the United States at Goldman Sachs, said that the difference between a rapid or prolonged recovery in the stock market will be reduced to three factors: how quickly the virus is contained, whether companies will have “access to sufficient capital and liquidity to last from 90 to 180 days “and if the fiscal stimulus can stabilize growth forecasts.
“If short-term arrests lead to corporate insolvencies, closings and permanent layoffs, damage to corporate earnings growth could persist even after the containment of the virus,” Kostin said in a statement.
Wall Street has clamored for fiscal financial help as the number of coronavirus cases continues to rise. The number of confirmed global cases exceeded 300,000 over the weekend, as deaths now amount to over 13,000, according to data from Johns Hopkins University.
In the United States, over 30,000 cases have now been confirmed. New York Governor Andrew Cuomo said Sunday’s state cases rose to 15,168 over the weekend. This is more than in France or South Korea.
The outbreak led the New York Stock Exchange to close its trading platform and temporarily switch to fully electronic trading starting on Monday. The NYSE expects that negotiations will proceed normally.
Trump announced Sunday that he had activated the National Guard in California, New York and Washington state – the three states with the highest number of choroavirus deaths – to reduce the virus outbreak.
“Things will get worse before they improve and markets will continue to reflect this reality,” said Marc Chaikin, CEO of Chaikin Analytics, in a statement. “This means that a shutdown process will take longer and will likely do more damage to the actions.”
Stocks experienced the biggest decline in a week since the 2008 financial crisis, with the S&P 500 index down more than 13%. These losses placed the broad market average of more than 32% below the record set on February 19.
Last week ended with all 11 S&P 500 sectors closing more than 20% below their 52 week highs. The S&P 500 was also at the pace of its worst monthly performance since 1940.
Expectations for the American economy have also rapidly deteriorated. Goldman Sachs economists wrote Friday that they expect a 24% contraction for the second quarter after a 6% drop in the first quarter. Ellen Zentner, an economist at Morgan Stanley, said in a statement that it predicts a historic 30% contraction in the second quarter.
“Just think that the economy went into a single and sudden recession in March,” wrote Prajakta Bhide, strategist at MRB Partners. “If there is no concrete evidence of significant progress towards controlling the epidemic in the next eight weeks, there will be no basis for people and businesses to feel safe to start normalizing economic activity.”
Investors were also shaken by a sharp drop in crude oil prices. West Texas mid-term futures fell 29.3% last week, their largest weekly drop since January 1991. US crude also fell more than 66% below its most recent 52-week high.
Strong crude oil losses are forcing investors to sell other assets such as stocks or bonds to cover losses in their energy positions.
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