After more than two million people were diagnosed with COVID-19 in the United States, panic selling appeared to be returning and global markets were in turmoil: U.S. stocks plunged more than 5 percent overnight, oil prices tumbled 8 percent, even gold came under pressure and dollar bulls exploded. As Asia looked set for black Friday, stocks began selling sharply, with oil down as much as 5%, gold falling and the dollar trying to break 97.
Crazy market! Panic selling of everything: except the dollar
As the Fed’s interest rate decision released a pessimistic message and the number of coVID-19 cases in the United States surpassed 2 million, the market suffered a “Black Thursday”, and panic selling spread around the world. All three major U.S. stock indexes fell well over 5 percent, recording their biggest one-day drop since March 16, WTI crude oil fell over 8 percent, and the VIX fear index soared over 47 percent.
Investors’ renewed fears of a renewed coVID-19 pandemic and the Fed’s downbeat economic forecasts sent markets reeling, with all three major U.S. stock indexes falling well over 5 percent, their biggest one-day percentage declines since March 16. The Nasdaq broke a three-day streak of record closing highs.
The Dow Jones Industrial Average closed down 1,861.82 points, or 6.9 percent; The Standard & Poor’s 500 index fell 188.04 points, or 5.89 percent. The Nasdaq closed down 527.62 points, or 5.27 percent.
The CBOE Volatility Index.VIX, a measure of investor anxiety, posted its biggest one-day gain since March 16.
“There are really no buying points,” said Paul Nolte, portfolio manager at Kingsview Asset Management. Almost selling like crazy.”
Tim Ghriskey, chief investment strategist at Inverness Counsel in New York, agreed. “Everything is for sale. People are worried that the stock market has peaked.”
The market has several theories to analyze this slump:
First, there is no obvious bad news, the U.S. stock market this rebound is really strong enough, adjustment is normal. Wall Street is pointing to signs that U.S. stocks are overbought, that the V-shaped rally is too fast and too fast, and that it is time for a pullback or at least a pause in the gains.
Second, the market is worried about the second wave of coVID-19 panic.
A third reason is that the Fed’s statement was dovish and gloomy about the future. After the Fed released its first pandemic economic outlook at the end of its two-day monetary policy meeting On Wednesday, Chairman Colin Powell warned that the recovery was still a long way off.
White House National Economic Council Director Larry Kudlow tried Thursday to calm a stock market that had plunged on fears of a comeback novel Coronavirus pandemic.
He praised the Fed’s plan to keep interest rates near zero for two years and said there were ongoing discussions on more economic stimulus. “I know today is a difficult day, but I don’t think today’s move marks the end of the line,” Kudlow told Fox Business. By the way, the stock market is still 40 per cent above its March 23 low.”
Asian shares also suffered heavy selling on Friday after a dark night. The Nikkei 225 average opened down 2.16 percent, extending losses to as much as 3 percent. Japan’s Topix index fell 3 per cent; South Korea’s KOSPI index opened 4.15% lower. Hong Kong’s Hang Seng index opened down 559.45 points, or 2.29 percent.
Investors are concerned about the second outbreak of a novel Coronavirus infection and the bleak outcome of yesterday’s Fed meeting, said Fxstreet analyst Ross J Burland. Risky assets are plunging amid a general mood of risk averse.
As stocks tumbled, crude oil also took a beating. On Friday, CRUDE oil futures continued to fall, extending losses as much as 5 percent to the key $35 level. Brent crude futures fell 2.5%. For now, however, oil prices are trying to recover from their lows, with WTI futures down less than 3 percent.
“This historic rally is being put to a reality check,” said John Doyle, vice President of trading and trading at Tempus Inc. There are concerns about a new wave of infections, but my thinking is that today is not that different from the beginning of the week.”
“But perhaps because stocks have risen too fast and too far and the dollar has fallen too far, traders are looking for excuses to take profits, pushing stocks off their highs and the dollar off its lows,” he added.
In the current session, the market needs to keep an eye on the progress of the epidemic. According to media reports, 21 states now have a rise in new confirmed cases, with a surge in at least nine. Arizona’s death toll rose by 30 percent. Texas has seen a 70% increase in confirmed cases.
New York Governor Andrew Cuomo said at a regular news conference Thursday that 21 STATES have seen a rebound in confirmed cases, with 14 reaching new highs. New York state is doing well, but New York is the latest to start the first phase of the resumption of work, there is uncertainty.
Jha, director of Harvard University’s Institute for Global Health, predicts 800 to 1,000 new deaths a day from now on, with another 100,000 expected to die between now and September.
“I think it’s catastrophic,” Jha told CNN. I don’t think that’s what we’re meant to do. We can change course. We can change course today.”
Jha’s estimates are almost identical to another tool used to simulate the impact of a novel Coronavirus. Earlier this week, the tool revised its estimate of coVID-19 deaths on October 1 to more than 193,000. Modeling tools now show that by October 1, nearly 170,000 Americans will have died from COVID-19.
CNN added that more than half of the states may have underestimated the number of cases because they did not follow CDC reporting guidelines. In addition, the report indicates that 26 states are experiencing an increase or a steady trend in new cases.
But Treasury Secretary Steven Mnuchin said on June 11 that the U.S. should not shut down its economy again even if there is another surge in coVID-19 cases.
According to CNBC, Mr. Mnuchin said the United States could not shut down economic activity again, and that would cause more damage, not just economic damage, but also medical problems caused by shelving.
Mnuchin also revealed that of the $3 trillion in anti-epidemic spending approved by Congress in 2020, only about $1.6 trillion so far has produced an economic boost. It is now ready to go to Congress for more money. Further aid to the states will depend on discussions with Congress. Another $1 trillion will be pumped into the US economy in July.