April 29, 2020 / 8:17 PM / a month ago

LIVE MARKETS U.S.-Stocks rise with Fed support, virus treatment hopes

    * Major averages advance; small caps outperform
    * Energy leads sector gainers; staples, utilities fall
    * Dollar slip, gold rises, oil jumps; U.S. 10-Yr yield

    April 29 - Welcome to the home for real-time coverage of
U.S. equity markets brought to you by Reuters stocks reporters
and anchored today by Sinéad Carew. Reach Sinéad on Messenger to
share your thoughts on market moves:
EDT/2005 GMT)
    U.S. stocks advanced on Wednesday though they pared gains
sharply right before the close. Stocks were boosted by positive
trial results for a potential treatment for COVID-19 and by
comments from the U.S. Federal Reserve. 
    Fed Chair Jerome Powell said now is not the time to worry
about debt, but to use the "great fiscal power" of the United
States to avoid deeper damage to the economy from the virus. He
also warned that the virus would slam near-term growth and pose
"considerable risks" in the medium term.
    "There as no expectation of a rate decision. We're at the
zero bound and we'll be there for the foreseeable future. What
the market really likes from Powell is his suggestion that
there's more the Fed can do both in terms of the size and scope
of its tools to aid the economy and markets. This implies that
the Fed is not out of ammunition," said Michael Antonelli,
market strategist at Baird in Milwaukee. 
    Long before Powell spoke investors had been cheering after
positive early trial results for Gilead Sciences Inc's
antiviral remdesivir, which a top U.S. health official said
would likely to become the standard of care for COVID-19 as it
helped certain patients recover more quickly.
    Here is your closing snapshot: 
    (Sinéad Carew)
EDT/1815 GMT)    
    While volatile stock markets tend to scare away many
part-time investors, DataTrek co-founder Nicholas Colas says
this market is unusual as data suggests that retail investors
have actually been piling in. His explanation? Casinos and
sports events have been closed down, so stocks may be providing
gamblers with their only chance for a flutter.
    Colas cites data from online broker Robinhood showing a 40-
120% increase in accounts holding stocks including Ford,
Aurora Cannabis, General Electric, GoPro Inc
 and Disney compared with March 1, before
COVID-19 related lockdowns.
    He notes that aside from Disney, this is a list of hugely
volatile stocks, which leads him to the conclusion that it must
be at least partly due to participation by gamblers who can no
longer go to the casino. "The dopamine rush of a full house is
the same as holding a hat-sized stock into an up 3% open on the
S&P. The human brain doesn’t know – or care – that one is
gambling (a proven long-run zero return) and one is investing
(proven long-run compounding)," said Colas, also citing data on
Google searches for the term "buy stock" as a support for what
he concedes is a "somewhat off-the-wall analysis." 
    But the data also leads him to wonder "what happens when the
US economy starts to reopen, and retail investors can go outside
and to work instead of sit at home trading?"
    For similar reasons, Julian Emanuel, chief equity and
derivatives strategist at BTIG, also sounded worried about what
happens to trading when the economy reopens. 
    Emanuel says demand for equities among the Millennial age
group is a core part of his firm's thesis for higher stock
prices. So when  Millennial investors are among the first to
return to work and have to leave their trading screens, he sees
a key source of demand for high-flying FAANG stocks disappearing
with them.
    (Sinéad Carew)
    The S&P 500 is forging just above a key Fibonacci
retracement of its February-March swoon. (Click on chart below)
    Indeed, the broad-market average has pushed slightly above
the 61.8% Fibonacci retracement of the recent bear-phase at
2,934.49. Traders will be watching to see if it can make the
leap into the close.
    Meanwhile, a momentum study is also nearing an important
hurdle. After falling into deeply oversold territory in
late-February, the daily RSI (now at about 66) has been steadily
improving. That said, it has yet to muster enough strength to
move back into overbought territory (>70.00).
    If the SPX can overwhelm the Fibo barrier, with the RSI
moving back into overbought, it can suggest potential for a more
extensive recovery. This because the index's strong underlying
thrust may require more time to dissipate, as was the case
earlier this year. At that time, the S&P 500 made higher highs
while the RSI diverged. The SPX only peaked after a period of
waning momentum.
    On a greater advance, the SPX will still have to contend
with its 200-day moving average (now at about 3,006). The
maximum Fibonacci retracement zone of the February-March slide
(76.4%/78.6%) is at 3,109.93/3,136.36. The Nasdaq 100 is
ahead of the game, and already nearing this resistance.

    Thus, action in the aftermath of today's FOMC Meeting may be
critical, given the potential for increased volatility.
    (Terence Gabriel)
The U.S. economy suffered its sharpest decline in 11 years in
the first quarter as shutdown orders to curb the COVID-19
pandemic brought business activity and consumer spending to a
screeching halt.   
    Gross domestic product (GDP) contracted at a
4.8% annual rate in the first quarter, according to the U.S.
Commerce Department, marking the largest drop since the global
financial crisis.
    In comparison, analysts had expected GDP to fall by 4%, and
many believe the worst is yet to come.
    "Ultimately, the market knew this was bad, didn't know the
exact number, but knew that it was a significant negative
leading to what will be a more significant negative," said
Justin Hoogendoorn, head of fixed income strategic analytics at
Piper Sandler.
    Personal expenditures shrank at 7.6%, the data point's worst
showing since 1980 according to Oxford Economics, which is bad
news considering the American consumer accounts for about 70% of
the economy. 
    A separate report from the National Association of Realtors
(NAR) showed pending sales of existing homes plunged
by 20.8% in March, blowing past the 10% drop economists
    While Lawrence Yun, chief economist at NAR, expects listings
and buying activity will begin to resume as the economy slowly
restarts, he suspects the damage has been done.
    "The usual Spring buying season will be missed, however, so
a bounce-back later in the year will be insufficient to make up
for the loss of sales in the second quarter," Yun writes.
"Overall, home sales are projected to have declined 14% for the
    But bad economic data seems baked into the market for now.
    All three major U.S. stock indexes were sharply higher, with
the S&P's Energy sector leading the charge in percentage
    (Stephen Culp, Karen Pierog)
    Even as data showed the U.S. economy declined more than
expected in the first quarter, Wall Street's main indexes were
rising on Wednesday as investors were optimistic about results
from trials of a potential COVID-19 treatment from Gilead
    Investors have been heavily focused on trials for potential
COVID-19 treatments as they are betting that once patients can
be treated, officials will be have greater confidence easing
stay-at-home rules to help reboot the economy.
    Gilead said its experimental antiviral drug remdesivir
helped improve outcomes for patients with COVID-19, and provided
data suggesting it worked better when given earlier in the
course of infection.
    "If it actually works then that's good news. The market's
moving on the Gilead news," said Chris Zaccarelli, chief
investment officer, Independent Advisor Alliance, Charlotte, NC
in a telephone call.
    Zaccarelli wrote that the awful Q1 GDP decline of 4.8% was
even worse "when you consider that the first two months of the
first quarter were relatively normal and this number only
includes the March lockdowns." 
    But he noted, "GDP news is backward looking. Everybody knew
it was going to be bad."
    "What matters to the market is forward looking information
like when we're going to get a cure or a vaccine. Any news on
treatment or a vaccine for COVID-19 is going to outweigh
backward looking economic numbers," he said.
    The S&P 500's communication services sector
was the biggest gainer as Google rose ~8%. 
    After this Energy and financial sectors were
the S&P's biggest percentage gainers. 
    Mastercard shares rose more than 6% after it reported
quarterly results that were much better than feared. More
defensive sectors lost ground. 
    Here is a snapshot of early trading:
    (Sinéad Carew)
EDT/1256 GMT)
    U.S. equity index futures are pointing to a higher open for
the major averages on Wednesday.
    This after Alphabet reported double-digit ad
revenue growth in its quarterly report on Wednesday
, and Gilead Sciences said this morning
that its experimental antiviral drug, remdesivir, had met the
main goal of a trial testing it in COVID-19 patients.

    That said, Q1 Advance GDP fell 4.8% vs. a Reuters poll
calling for  a decline of 4%. 
    In any event, as the market sorts through the GOOGL, Gilead
news and the GDP data, stock futures have strengthened, while
the U.S. 10-Year Treasury yield is around 0.60%.
NYMEX oil futures are rallying nearly 20%, and attempting
to end a 2-day losing streak.
    Meanwhile, markets await the results of the latest FOMC
Meeting at 2 PM EDT (1800 GMT) At this meeting, the Fed is
expected on to reiterate its promise to do whatever it takes to
support the world's largest economy.
    Here is your premarket snapshot:
    (Terence Gabriel)

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