Friday March 13th

13-03-2020

Stocks set to surge following worst day since the ’87 crash, S&P 500 futures hit ‘limit up’

U.S. stock index futures surged in volatile trading on Friday as Wall Street tried to recoup some of the sharp losses suffered in the previous session — the worst since the “Black Monday” market crash in 1987. S&P 500 futures jumped more than 5% to reach their “limit up” level. These limit levels act as a ceiling for buying until regular trading begins and are meant to insure orderly trading. Dow Jones Industrial Average futures were up more than 1,100 points, implying a gain of nearly 1,000 points. Nasdaq 100 futures also surged. The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 5.7% higher. With stock futures at their upside limit, investors could get a better sense of where the market will open by tracking the ETF. Apple shares jumped 7.4% in the premarket after an analyst at Wells Fargo upgraded the tech giant to overweight from equal weight, citing a “compelling risk/reward” outlook.  Futures also got a boost after House Speaker Nancy Pelosi said U.S. lawmakers and the White House were close to a deal on economic relief amid the coronavirus outbreak. “We’ve resolved most of our differences,” Pelosi told reporters Thursday evening, noting it’s about “testing, testing, testing.” President Donald Trump tweeted: “If you want to get money into the hands of people quickly & efficiently, let them have the full money that they earned, APPROVE A PAYROLL TAX CUT until the end of the year, December 31.” In Germany, the government pledged to spend all the money needed to support the economy amid the outbreak. “We are using all necessary measures to protect workers and companies,” German Finance Minister Olaf Scholz said in a news conference. Central bank action from around the world also lifted futures. The Bank of Japan injected 500 billion yen as a response to the global market sell-off. Norway’s central bank cut rates by 50 basis points and the Bank of Korea was reportedly in talks over a possible emergency rate cut. Earlier in after-hours trading, Dow futures had indicated an opening loss of 700 points. The overnight action followed the official end of the longest bull-market run in history. The S&P 500 plummeted 9.5% Thursday in its worst day in more than three decades, joining the Dow in a bear market, or more than 20% from its recent peak. The Dow also suffered its worst point drop ever and the biggest percentage decline since 1987. The market’s historic drop on Thursday indicated that investors believe the government’s fiscal plans and the Federal Reserve’s ramped-up funding actions wouldn’t be sufficient to offset the economic impact from the coronavirus. “I would advocate for pushing money into the hands of companies right now, and into the hands of individuals … and individual consumers because that is really the only thing … that is going to help at this point,” David Riedel, president and founder of Riedel Research Group, told CNBC’s “Squawk Box Asia” on Friday morning Singapore time. “When they’re ready to spend, then that V (shaped recovery) ... can take hold and things can start to recover quickly,” he said. Stocks briefly cut losses Thursday after the Fed said it would conduct three repo operations as part of a stepped-up program to help keep liquidity flowing. The central bank added more than $198 billion to the financial system in a combination of overnight and longer-term offerings. But the market ended up closing at session lows. Investors were also bombarded with a slew of negative headlines about the fast-spreading coronavirus. The NCAA has canceled its March Madness basketball tournaments, a day after the National Basketball Association suspended the remainder of its season indefinitely. New York Mayor Bill de Blasio declared a state of emergency, while new restrictions for large events and businesses were imposed. “There are no guarantees here, and things could get worse,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “If the number of cases continues to increase, the economic damage will go from hitting confidence to something worse. If the economy deteriorates, markets will reflect that shift.” Meanwhile, the White House’s response to the coronavirus outbreak disappointed the market. President Donald Trump announced travel from 26 European countries will be suspended for 30 days, and added the administration would provide financial relief for workers who are ill or quarantined. “These are no doubt jarring times — investors should take this time to review their portfolio and make sure they’re comfortable with their level of risk,” said Mike Loewengart, managing director of investment strategy at E-Trade. Stocks in Asia Pacific traded wildly on Friday after shares of Wall Street saw a historic drop overnight, as fears over the global coronavirus outbreak continued to weigh on investor sentiment. In Japan, the Nikkei 225 fell 6.08% to close at 17,431.05 after earlier plunging 10% during the session. The moves followed its Thursday close in bear market territory at 18,559.63 — more than 20% off its 52-week closing high. The Topix index dived 4.98% to end its trading day at 1,261.70. Meanwhile, South Korea’s Kospi dropped 3.43% to close at 1,771.44 while the Kosdaq index fell 7.01% to end its trading day at 524. Hong Kong’s Hang Seng index declined 1.49%. Mainland Chinese stocks saw losses on the day, with the Shanghai composite down 1.23% to about 2,887.43 while the Shenzhen component was 1% lower at 10,831.13. The Shenzhen composite also fell 1.076% to around 1,798.98. Oil prices were set for their worst weekly drubbing since the 2008 financial crisis, despite rising over 3% on Friday, as investors fretted over evaporating demand from the coronavirus pandemic and a production ramp-up by top producers. Brent crude was up $1.90, or 5.7%, at $35.12 a barrel after falling more than 7% on Thursday. For the week, Brent is set to fall around 24%, the biggest weekly decline since December 2008, when it fell nearly 26%. U.S. West Texas Intermediate crude rose $1.57, or 5%, to $33.09 per barrel after falling more than $1 earlier in the session. WTI is set to drop nearly 21% this week, also the most since the height of the financial crisis. Gold rose slightly on Friday as investors weighed the economic hit from the coronavirus outbreak and as financial markets stabilized a bit after a rout, but the bullion was still headed for its worst week in more than three years. Autocatalyst metal palladium also rose as much as 8%, after having plunged nearly 28% on Thursday in a global selloff. It, however, was on track to record its biggest weekly fall ever. Spot gold was up 0.6% to $1,587.83 per ounce, having fallen more than 1% earlier. For the week, the precious metal is down 5.1% - the most since November 2016 - including Thursday’s 4.5% slide. U.S. gold futures fell 0.19% to $1,587.20.