US stock futures fall on stimulus hopes after a three-day rally

(Bloomberg) – American stock futures declined and cooled after the first three-day rally since February, when investors speculated whether government and central bank-related aid would offset the pandemic’s damage to the economy.

Contracts for the S&P 500 declined 0.9% to 2,585.50 at 10:36 a.m. in Tokyo. In the largest rally since 1933, the underlying value rose almost 18% from Tuesday to Thursday, while the Dow Jones Industrial Average rose 20% above its recent low and met the technical definition of a bull market.

The United States overtook China in most coronavirus cases worldwide, due to a sharp rise in infections in New York. However, recent market gains show that investors have become increasingly confident that a $ 2 trillion stimulus package and new Federal Reserve pledges may be enough to save the economy from a deep recession. Unemployment claims have more than quadrupled the previous record and provide the first proof of how severe the damage will be.

“Combined with the Fed’s efforts, we will find a good way to where we need to be,” said Kathy Jones, chief strategist for fixed income at the Schwab Center for Financial Research. “People are very happy that we have financial and monetary policy on board.”

The S&P 500 rose 6.2% on Thursday. This is another dramatic move that has made trading on the stock markets a weak nerve. Volatility remains elevated, and Cboe’s fear indicator closes above 60 for a ninth record consecutive day. When the angry movements in the futures market continue, trading bands listed on the stock exchange prevent profits or losses from exceeding 5%. These are 2,746 at the upper limit and 2,483 at the lower limit.

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Markets looked beyond unemployment claims data and rose to a record 3.28 million Americans when companies were shut down to prevent the virus from spreading. While the reading has exceeded estimates, aid from the United States government can help offset the harm to workers and businesses. Fed chairman Jerome Powell also wanted to reassure the public that the central bank would not run out of anti-crisis ammunition.

“This is a global economic paralysis that markets are trying to price in,” said Philip Lawlor, general manager of FTSE Russell for global market research. “This means that the economic data will be remarkably bad. What we’re all trying to get our heads around is how long this will take. “

Read More: A bull market for banks and other strange facts about the stock recovery

The rise of the S & P 500 since Monday is the best since the Great Depression. Although it is strange, in fast-moving markets there are occasionally leaps at a similar pace, which market historians only take seriously when they start to show perseverance.

“The overall positive tone in the markets this week – better market function thanks to liquidity injections from central banks and now the stimulus packages in the US to complement those in Europe – I think overall there is still a positive tone here,” said Brian Nick, Chief Investment Strategist at Nuveen. But he said there is an “understanding that we face major economic challenges.”

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