The Dow Jones Index recorded the worst one-day decline since June 11 on Friday, which caused the blue chip index to fall to its lowest point since May 26, and at least temporarily removed resistance from stock investors. The subsequent gains may be more difficult. . As the infection rate of COVID-19 in the United States rises, they may gradually lose their bullish argument.
Over the past week, the daily incidence of new coronavirus cases in multiple US states has accelerated, prompting investors to rethink the rising trend of the Dow Jones Industrial Average.
And the S&P 500 Index
More than 30% higher than the low point and high technical content of the Nasdaq composite index in late March
It is more than 40% higher than its latest low point in 2020.
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Data compiled by Johns Hopkins University shows that the United States recorded more than 45,000 cases on Friday, far exceeding the record-breaking 39,972 cases reported on Thursday, which further optimistic predictions. He expressed doubt that the rapid economic recovery from the pandemic would halt business activities for nearly four months.
Last Friday, the increase in new coronavirus cases prompted the governors of Texas and Florida to withdraw some measures to reopen businesses, after these states were the first to try to restart economies facing severe social isolation restrictions to curb the spread of infectious diseases State. Texas reported 6,426 new coronavirus cases and Florida reported 8,900 cases.
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The White House Coronavirus Task Force, composed of Vice President Mike Pence and the top public health experts in the United States, has been quiet since April 27. The White House Coronavirus Task Force has remained silent since April 27. The recurrence of pathogens seems to be sufficient. on Friday.
For many investors who communicate with MarketWatch, the market’s prospects start with the regression of the epidemic or at least the discovery of reliable treatments and vaccines.
However, many factors are also likely to exacerbate the turmoil in the financial markets from next week to July.
Of course, these factors include not only the continuing impact of the pandemic, but also a series of issues that may bring more anxiety to stock investors:
- COVID-19 cases of rising infection and hospitalization
- The U.S. Department of Labor’s monthly employment report to be released on Thursday has brought unexpected economic effects
- Pension and mutual funds rebalance the portfolio at the end of the quarter and the end of the month
- Congress further spurs economic plan to stagnate
- Joe Biden’s leadership in the presidential election
- Some investors use market technology as a decision-making tool
- In the week before the “July 4th” holiday seen on Friday, stock market trading volume was low
When asked how to rank many issues, Jamie Cox, the managing partner of Harris Financial Group, told MarketWatch that the epidemic was number one.
He said: “Everything starts with a virus. All other effects depend on the first result.”
Experts say that indeed, the hope for a sustained economic recovery depends on whether the United States can effectively curb the epidemic of coronavirus, although the lack of a unified national strategy makes public health results uncertain.
MarketWatch’s Jaimy Lee reported that the COVID-19 vaccine will change the trajectory of the pandemic, which has killed nearly 500,000 people globally, allowing the economy to be fully open and people to return to work and study. However, according to a Bernstein analyst’s report on June 5, the vaccine may not immediately become a panacea: “Although we are optimistic about the final development of the SARS-CoV-2 vaccine, we are not It is hoped that the first production of vaccines will become a silver bullet to solve pandemics.”
Investors are waiting for the U.S. Department of Labor’s monthly employment report, which will be released this Thursday, because this year’s Friday will usher in the July 4 holiday. The May report showed that it was surprising that 2.5 million new jobs were created, which confuses people about the expectation of a sharp decline again. Perhaps the expectation of a sharp rebound next week has increased. The average estimate of economists surveyed by MarketWatch is that there will be an increase of 3 million jobs in June, and the unemployment rate will fall from 13.3% to 12% again. Thursday’s disappointment may shock investors and flatten the market to the point where May’s report helps trigger a strong upward trend.
In addition, many people warned that to fully resume work, it is now necessary to see about 30 million Americans receive unemployment benefits, and it may take years to restore the level before the coronavirus infection.
Ryan Detrick, senior market strategist at LPL Financial, wrote in a research report last Friday: “As far as the recent economic data is concerned, we hope to find out that it will take years for the economy to fully recover.”
He pointed out that in the 10 recessions since 1950, lost jobs took an average of 30 months to recover, and none of these recessions saw the labor market lose so much (see photo):
Rebalancing at the end of the quarter
Market participants predict that billions of dollars of stocks and bonds may be transferred to the portfolio because investors’ goal is to maintain specific stock and fixed income investment allocations at the end of the quarter or month. Traditionally, these allocations were approximately 60% stocks and 40% bonds, but the large rise in stocks during the quarter may force them to rebalance significantly.
“Given the sharp rise in the global stock market that we saw in the second quarter, it is natural to believe that there will be some rebalancing from stocks to bonds at the end of the quarter,” Brian Price, investment director of the Federal Financial Network, told MarketWatch.
He said he expects the pension fund’s inventory to increase by $75 billion next week. CNBC reported that the rebalancing may be between US$35 billion and US$76 billion.
Price said: “As we approach the end of the quarter next week, the market volatility we are seeing today may continue to exist.” However, investors are cautioned not to seize market opportunities when predicting pension changes.
Congress has discussed further government stimulus spending to help small businesses and individuals, and analysts predict that another bipartisan mutual assistance measure may be introduced in late July. Treasury Secretary Steven Mnuchin said earlier this month that the Trump administration is open to providing a new round of aid, but it is worrying that there is not enough consensus to advance other aid.
The Democratic-managed House of Representatives passed a $3 trillion coronavirus relief bill last month, which represents a public offer in talks with the Republican-controlled Senate and the Trump administration.
Some experts say that without additional assistance, the economy and the market may also stand still.
A public opinion poll published by the University of Siena/New York Times on Wednesday found that Democratic presidential nominee Joe Biden led Trump by 50% to 36%. A week ago, a poll by Fox News put Biden ahead by 50% to 38%.
Biden has said that he will increase the corporate tax rate to 28% to postpone Trump’s corporate tax reform in 2017. A Goldman Sachs report estimated that such results would increase the S&P 500’s 2021 earnings per share from the current $170 to $150.
Earlier this week, CNBC celebrity Jim Cramer attributed Wednesday’s sell-off to Biden. “For me, this is Biden’s move,” he added. “He sounds like another president, which is bad for capital. If so, I want to have a little money.”
MarketWatch’s Tomi Kilgore pointed out that the breakthrough of the 10-year Treasury bond trend line may also herald an upward trend in the stock market.
He pointed out that the benchmark 10-year rate of return
Dow Jones market data shows that the price of gold fell below the upward trend line, caught up with bids that escaped safety, and pushed its yield down by 3.8 basis points (0.038) to 0.636%, setting the lowest closing price since May 14 based on the afternoon It closes at 3:00 Eastern time.
The move by Janney Montgomery Scott technical analyst Dan Wantrobski shows that the rising trend of the COVID-19 low in early March has ended.
The analyst wrote: “The decline here shows that the highs and lows since April have been blocked, and we may see lower yields in the next few trading days, as well as the experience since the March plunge Of a larger stock retracement,”
The trading week for holiday breaks is shortened, and the US market is closed due to Friday, July 4 holiday breaks, which may exacerbate price volatility because traders tend to leave early during the holidays.