The Federal Reserve fired an even larger “bazooka” at the economy yesterday in its latest attempt to stave off the destruction caused by the coronavirus pandemic.
It worked, with the Dow Jones Industrial Average gaining 1.2%, the S&P climbing 1.5% and the Nasdaq adding 0.8%.
With markets closed today in observance of Good Friday, the Dow closed the week up 2,666 points, its greatest weekly points gain ever. The S&P is up 12.1% since last Friday, it’s best one-week gain since 1974, and the Nasdaq has its best week since 2008, gaining 10.6%.
Pushing the markets higher was a surprise announcement from the Federal Reserve that it was going to support businesses affected by the coronavirus pandemic with a new $2.3 trillion stimulus plan.
The plan would give loans from $1 million up to $25 million to businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019. Principal and interest payments on the loans will be deferred for a year. The Fed also plans to buy both investment-grade and high-yield (or junk) bonds.
In a statement, Fed Chairman Jerome Powell said “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
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CNBC’s Jim Cramer added “This Fed is the most aggressive Fed. They do not want to be known as the reason why we went into a depression. I’m very impressed. The Fed is on its game and this is what is needed because we got to fight off a depression, we got to get America open for business.”
The market was able to rally despite more catastrophic job losses due to the economy shutting down to fight the coronavirus. New jobless claims totaled 6.6 million, the second straight week of more than 6 million new claims, bringing the 3 week total to almost 17 million, or nearly 10% of the workforce.
“This week’s unemployment insurance claims are yet another indication of the recessionary dynamics created by the coronavirus pandemic,” Moody’s Senior Vice President Robard Williams wrote in a statement.
Expectations from Bank of America are for between 16 million and 20 million jobs lost, and the unemployment rate peaking at 15.6% before June.
The oil market was also in turmoil yesterday, with the planned OPEC+ virtual meeting bringing production cuts, yet crude prices here in the US continuing to fall.
OPEC+ members agreed to cut production by a historic 10 million barrels per day, with most of that reduction in output coming from Saudi Arabia and Russia. The cut would amount to roughly 20% of daily production. That may not be enough, with many analysts believing that the drop in global demand due to the coronavirus is even greater than the planned cuts.
West Texas Intermediate (WTI) crude initially climbed yesterday on news of the production cut, but closed 9.3% lower to settle at $22.76 per barrel.
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