Morning Minutes 6/11/2020

Morning Minutes

Stocks Retreat as Fed Forecasts and Coronavirus Case Counts Dampen Enthusiasm

June 11, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Stock markets around the world have been backsliding overnight and into this morning as investors reassess expectations of a quick turnaround for economies. Yesterday, the Fed indicated that it plans to continue asset purchases and to keep interest rates at current levels through 2022 (throwing a bucket of cold water on negative interest rate speculation). FOMC members forecast a 6.5% decline for US GDP this year followed by a 5.0% rebound for next year.

These forecasts reminded investors that a lot of economic damage has already been done by the coronavirus lockdowns and that while central banks and governments are providing support, the path to recovery remains uncertain. Meanwhile, signs that COVID-19 cases have started to climb again as economies in the US start to reopen reminded investors that the quick, “V” shaped recovery market bulls have been banking on is far from a done deal, that there may be significant bumps and setbacks along the way and that any economic rebound we do get could be uneven.

US index future declines vary this morning from 1.5% for the NASDAQ to 2.9% for the Dow. Overseas, the DAX, FTSE and Nikkei are all down about 2.75%. Crude oil is down 4.3%-4.8% with Brent Crude falling back under $40.00/bbl. Gold is up 0.75% as some capital returns to defensive havens and investors pick up on the Fed’s indications that easy money and central bank stimulus programs could be around for years to come.

The US weekly jobless claims report was mixed with initial claims of 1.542 million slightly better than the 1.550 million street estimate, but continuing claims of 20.92M worse than the 20.0M street estimate.

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