English (India)

Dow surged on hopes of more fiscal and monetary stimulus

calendar 16/09/2020 - 17:59 UTC

On mid-Wednesday, Dow further surged over +200 points on hopes & hypes of corona stimulus 4.0 as U.S. Congress (Pelosi) and White House (Trump) may be again negotiating behind the scene on the next COVID-19 relief package. As per the report, members of the bipartisan House Problem Solvers Caucus released a $2T package Tuesday meant to appeal to both parties. The proposal includes measures to bring back the Paycheck Protection Program (PPP) for small businesses and direct checks of $1200 or more for taxpayers.

Meanwhile, the White House Chief of Staff Meadows said Wednesday he has been more optimistic about reaching a coronavirus relief bill in the last 72 hours than in the last 72 days, indicating Democrats and Republicans are closer to finding common ground on passing more reliefs. Meadows said President Trump's number one priority is a direct stimulus to people in need, while the White House still won't consider bailouts for so-called poorly run state budgets. And if House Speaker Pelosi is willing to stay in session until a deal is reached, Meadows said he, the President, and Treasury Secretary Mnuchin are also more than willing to negotiate and reach a timely agreement.

Dow was also boosted by a report, quoting HHS official that the Trump admin is ready to distribute the COVID-19 vaccine from the next day (free of cost), once the approval for the same is on the table. Meanwhile, the US Defense Department and HHS compiled a report to Congress and a strategy (playbook) for states in which they laid out the proposal to gradually start a free vaccination campaign in January, or even earlier if possible, and eventually offer the vaccine at no charge to all U.S. citizens (voluntary vaccinations, not compulsory). The report pointed out that more than one vaccine could be available but stressed most of these would require people getting a double-dose of the vaccine from the same manufacturer.

Further, the director of CDC Redfield said in a Senate testimony Wednesday the U.S. should have enough COVID-19 vaccines to return to regular life by Q2/Q3-2021: If you're asking me when is it going to be generally available to the American public so we can begin to take advantage of vaccine to get back to our regular life, I think we're probably looking at--- late second quarter, third quarter 2021.

Dow was also boosted in hopes of a more dovish hold by the Fed after disappointing retail sales for Aug. The market is expecting Fed’s latest dot-plots may indicate near ZIRP till 2023, unemployment target below 4% and inflation target +2.25%. The Fed is not expected to boost any pandemic QQE as it may take a moderately optimistic view about the ongoing economic recovery to balance USD bulls & bears!!

The risk-on sentiment was also buoyed by hopes of a TikTok deal as the Chinese government is unlikely to block the agreement between ByteDance and Oracle. According to the agreement, a new, United States-based company will be formed to run TikTok, with ByteDance as the majority shareholder. Oracle, who will hold a minority stake, will independently process the video app's data. Earlier today, there was a report that the White House is in an internal struggle between China hawks (Pompeo, Navarro) and doves (Mnuchin, Kudlow, Lighthizer). Now, Trump will make the final decision and it’s expected to be approved soon as the U.S. version of TikTok may create almost 20K jobs (ahead of the election), everything being equal.

Technical Outlook: SPX-500, DJ-30, and NQ-100 (Futs): Updated 09/09/20

 

 

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