Saturday, June 27, 2020


Dow closes 730 points lower after spike in coronavirus cases forces Texas and Florida to close bars again, while bank stocks sink on stress tests

Social media stocks take a hit as more companies pull ad spending on hate speech concerns

HATE SPEECH IS NOT FREE SPEECH
HATE SPEECH IS VIOLENCE

Published: June 27, 2020 By Mark DeCambre and  Andrea Riquier

Rising cases rattle Wall Street GETTY IMAGES

U.S. stock indexes closed at their lowest levels in about two weeks Friday, after Texas and Florida were forced to backtrack on reopening their economies as coronavirus cases rose further and a record number of new cases were reported nationwide.

Meanwhile, investors were also parsing the results of the Federal Reserve’s bank stress tests which resulted in a cap on dividends and stock buybacks.
How did benchmarks perform?

The Dow Jones Industrial Average US:DJIA closed 730.05 points, or 2.8%, lower at 25,015.55; and the S&P 500 index US:SPX retreated 74.71 points, or 2.4%, to close at 3,009.05, with the S&P’s financial sector XX:SP500 sinking 4.3%, and the energy sector XX:SP500 3.5% lower. All 11 sectors of the S&P 500 closed deep into negative territory on Friday.

Meanwhile, the tech-heavy Nasdaq Composite Index US:COMP lost 259.78 points to reach 9,757.22, a fall of 2.6%.

For the week, the Dow lost 3.3%, the S&P 500 notched a 2.9% decline, and the Nasdaq fell 1.9% for the period.


What drove the stock market?


Investors have wrestled with rising daily rates of new U.S. coronavirus cases all week and that again cast a pall over the stock market on Friday.

U.S. states saw a single-day record rise of 37,000 in infections on Thursday, led by Florida, Texas, California and Arizona, surpassing the 36,188 level from April 24, according to analysis of data from Bloomberg.

That case count “blew out any of the previous records,” said Will Geisdorf, senior research analyst with Sarasota, Fl-based Allegiant Private Advisors. “I think the markets are looking at that and starting to discount the potential for a V-shaped recovery.”

As evidence mounts that consumers are losing confidence, there will be pressure on policymakers to deliver another round of fiscal stimulus, Geisdorf said in an interview. “That’s what markets need to get out of this period of consolidation and volatility and continue higher. We’ve had the best 50-day period in market history. Some sort of correction was needed to relieve excessive optimism.”

Governors in Texas and Florida ordered all bars to close again on Friday, making the states the first to reverse some reopening measures after months of lockdowns. Texas reported 6,426 new coronavirus cases Thursday, according to Johns Hopkins University data, and Florida reported over 8,900.


Overall, total cases in the U.S. have topped 2.4 million and that increase, notably in southern and western states in the U.S., has also resulted in business reopening plans being halted in North Carolina, Louisiana and Kansas. However, governors in New York, New Jersey and Connecticut are proceeding with reopening efforts but imposing a 14-day quarantine for visitors from some hard-hit states.

“The market has been threatened by anything that jeopardizes the economic recovery,” Quincy Krosby, chief market strategist at Prudential Financial, told MarketWatch. “What you are seeing is the market react to the headlines,” she said.

The key for some investors is determining the degree by which the rise in cases results in hospitalizations and deaths, Krosby said. “It will give us a sense of whether the therapeutic treatments are working,” she said.

Investors are also digesting the results of the Federal Reserve’s annual bank stress tests which requires banks to preserve capital by suspending share repurchases and cap dividend payments in the third quarter based on average net income over the past four quarters.


Read: Opinion: The Federal Reserve’s bank stress tests put dividend payments at risk GOOD!DIVIDENDS ARE WAGE THEFT 

However, financial institutions got a boost on Thursday after the Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said they are planning to loosen the restrictions imposed by the Volcker rule and allow banks to more easily make large investments into venture capital and similar funds, among other rule rollbacks.

BANKS CAN'T MEET THEIR CAPITAL REQUIREMENTS SO IT MUST BE THE REGULATION'S FAULT
(AYN RAND LOGIC)In U.S. economic data, consumer spending climbed in May to a record 8.2% after tumbling in April, as consumers used government stimulus checks to help Americans deal with job losses during the pandemic. However, personal incomes sank 4.2% last month, reflecting the mass unemployment.

“Consumer demand will probably look good in June as well, supported by the reopening in the Northeast and a still-elevated savings rate,” wrote Jefferies analysts Aneta Markowska and Thomas Simons. “However, stimulus payments are now shrinking and dragging down overall income growth,” the wrote.

In other economic reports, the final results of the consumer-sentiment survey in June slipped to 78.1 from an initial 78.9, the University of Michigan said Friday.


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