Daily Market Color

Fed Chair Powell Warns of Further Economic Damage in Q2


Powell strikes cautious tone in FOMC press conference, says risks are “tilted to the downside.” After their two-day meeting, the Fed did not announce any new policy changes and has opted to refrain from changing their benchmark rate for the foreseeable future. In his press briefing following the announcement, Fed Chair Jerome Powell acknowledged the extent of the virus impact on the economy, citing high unemployment rates in minority communities and a projection of shrinking GPD for Q2. Despite creating 7 lending facilities and increasing asset purchases in the markets, Powell believes the Fed and Congress must continue to act, adding, “Will there be a need to do more though? I think the answer will be yes.” In the coming weeks, the Fed is set to unveil new lending programs in partnership with the US Treasury Department to offset some of the economic damage. Equities maintained gains throughout the day, with the Dow Jones and S&P 500 closing 2.2% and 2.7% higher respectively. Treasury yields and swap rates were little changed.


Read the full FOMC statement here: https://www.federalreserve.gov/monetarypolicy/files/monetary20200429a1.pdf



News of positive antiviral drug trial spreads optimism in markets. Reports that initial testing of Gilead Sciences drug Remdesivir shortened the recovery period of infected parties from 15 to 11 days was a big driver of equity gains during Wednesday’s trading session. National Institute of Allergy and infection Diseases Director Anthony Fauci added, “Although a 31% improvement doesn’t seem like a knockout 100%, it is very important proof of concept. What it has proven is that a drug can block this virus.” This marks the first clinical trial in the US in order to find a treatment for COVID-19.



Day ahead. A flurry of new economic data will be released throughout the day, starting with weekly jobless claims, personal income and outlays, and the employment cost index. After growing 4.427M in the April 18th week, jobless claims came in at 3.839M for the April 25th week. After peaking in March, the rate of growth has slowed in the past few weeks. Personal income, which measures household incomes including wages and salaries, fell 1.1% in March, with consumer spending dropping 4.5%. The employment cost index, which measures total employee compensations costs, grew 0.6% in Q1. Chicago PMI figures measuring business conditions in the region will be released later this morning, with economists expecting April figures to fall almost 10 points to 37.9 (readings below 50 indicate a contracting business sector).


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