In its second emergency rate cut in two weeks, the Federal Reserve reduced its benchmark to basically zero, dropping the target to 0-0.25%. The bank also said it would boost its bond purchases by $700 billion. Global central banks agreed to widen the scope of their dollar swap lines with the Federal Reserve. Investor reaction to the surprise further central bank easing has been to use it as an opportunity for more moves to safety. S&P 500 futures hit the bottom of their trading limit shortly after opening and Treasury yields dropped. Overnight, the MSCI Asia Pacific Index was down 3.8% as data from China showed an even worse than expected slump in the first two months of the year. (Bloomberg)
Data from China overnight provided a first glimpse of what the coronavirus can do to an economy amid a prolonged quarantine of millions of people. Industrial output tumbled by 13.5% and total retail sales plunged by 20.5% Y/Y in January and February, according to the National Bureau of Statistics. The urban unemployment rate surged to 6.2% in February, the highest level ever reported, and fixed asset investment slumped by 25%. (SA)
The largest eight U.S. banks, including BofA, JPMorgan, and Citigroup are putting share buybacks on hold through the end of Q1 and all of Q2 as they put capital to use by helping consumers and businesses. The move sounds smart politically, particularly as the Fed has re-launched QE with a vengeance, but it might dash the hopes of some bank investors. After all, what's the point of over-capitalization if a bank can't buy back stock when shares are cheap? (SA)
With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.