Stock Futures Plunge Again As Dems Vote Down Stimulus Bill
Stock futures plunged again last night after the economic stimulus plan was voted down in the Senate by Democrats, saying it didn’t do enough for workers and does too much for companies looking for a bailout.
Dow Jones Industrial Average futures fell more than 800 points, or 4.3% along with the S&P 500 and Nasdaq futures. Earlier in the trading session, futures hit their “limit down” of 5%, meaning no new trades could happen below that level.
The stimulus bill, which National Economic Council Director Larry Kudlow said Saturday will total more than $2 trillion, will be roughly equal to 10% of our nation’s economic output.
While the bill wasn’t passed yesterday, there’s hope that the two sides can reach an agreement soon.
Senate Minority Leader Chuck Schumer, D-NY, said the bill was a “corporate bailout” that didn’t do enough to protect everyday workers. But he added that he hopes both sides can come together and get the bill passed in the next 24 hours
Treasury Secretary Steve Mnuchin says that coupled with the stimulus bill, the entire economic stimulus package that also includes the Federal Reserve providing liquidity to businesses could top $4 trillion.
“We can lever up to $4 trillion to help everything from small business to big business get through the next 90 to 120 days as we win this war,” he added during an interview yesterday with Fox News.
With the stock market coming off its worst week since the financial crisis, Wall Street is looking for anything to signal economic relief is on the way as the coronavirus continues to shut down more and more of our economy.
All 11 S&P 500 sectors closed last week more than 20% below their 52-week highs, signaling a bear market in every sector, and the S&P Index is on pace for its worst month since 1940.
David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a note that the difference between a fast or a prolonged recovery in stocks will come down to three factors: How quickly the virus is contained, whether businesses will have access to enough capital and liquidity to last the 90 to 180 days, and whether fiscal stimulus can stabilize growth forecasts.
“If short-term shutdowns lead to business defaults, closures, and permanent layoffs, the damage to corporate earnings growth could persist well after the virus is contained,” he added.
Perhaps much more concerning are the recent comments made by Federal Reserve Bank of St. Louis President James Bullard.
During a Sunday interview with Bloomberg News, he said that he is forecasting the U.S. unemployment rate will hit 30% in the coming months as the coronavirus pandemic continues. “This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” and added that he sees a 50% reduction in our country’s GDP.
Bullard did have a bit of optimism, saying he expects the economy to rebound by the third quarter.
“I would see the third quarter as a transitional quarter,” and the following quarters “quite robust” as Americans begin to feel comfortable spending money. “Those quarters might be boom quarters,” he said.