Tuesday, March 3, 2020

G7 and Central Bankers In Wait And See Mode -- Oh, Wait A Sec!

Here's from our note yesterday:
"Fed rate cuts are a foregone conclusion, the question is will they wait for the March meeting, or do an emergency cut this week? The latter if the market continues to sell off.
The fact that stocks are up this morning in anticipation of intervention has to be calming to the Fed. If they jawbone the market higher, they could hold off till the meeting. Although the news this morning is that G7 central banks are meeting by phone this week; the market is rallying on the prospects for immediate coordinated action."
Here's this morning's G7 statement:
March 3, 2020

U.S. Treasury Secretary Steven T. Mnuchin and Federal Reserve Chair Jerome H. Powell led a call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus disease 2019. At the conclusion of their meeting, they issued the following joint statement:
Washington – “We, G7 Finance Ministers and Central Bank Governors, are closely monitoring the spread of the coronavirus disease 2019 (COVID-19) and its impact on markets and economic conditions.
Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks. Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase. G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.
We welcome that the International Monetary Fund, the World Bank, and other international financial institutions stand ready to help member countries address the human tragedy and economic challenge posed by COVID-19 through the use of their available instruments to the fullest extent possible.
G7 Finance Ministers and Central Bank Governors stand ready to cooperate further on timely and effective measures.”
As I was preparing this message, 23 minutes into the session, the S&P 500 was off -1.04%, and the Dow was down 293 points. 

Then, while I was applying the finishing touches, stocks literally screamed higher, with the Dow showing a +200 print -- the Fed just surprise-announced an .50% rate cut.

Now, as I try to close this message, the Dow's down 100 points, but it's jumping all over the place by the second. Could go green again any minute. If indeed traders fade this news, it could get ugly in a hurry...

Fed chair Powell is holding a press conference at the top of the hour.

Stay tuned...

P.S. Treasury Secretary Mnuchin mentioned this morning that if needed they'll offer up an infrastructure spending plan to battle the economic impact of the virus. I know... we'll go there later...

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