- The Dow Jones continued its surge mid-week with another big move to the upside.
- Bulls carried the Dow more than 1, 06 points higher as Boeing flew % on hopes of a meaningful bailout.
- Renowned economist Mohamed El-Erian, who presaged the coronavirus crash, is not confident that the rally is sustainable
The Dow Jones skyrocketed toward its second straight quadruple-digit gain on Wednesday as clarity about the US government imminent fiscal stimulus package ignited a wild 37% bounce in Boeing stock.
But Dow bulls may be concerned that this is only a brief reprieve, because one of the top economists who called the stock market crash is warning against a dead cat bounce.
Dow Jones Surges on Stimulus Hopes
All three of
- The Dow gained 1, (points or 5.) (% to hit) , 12.
- The Nasdaq climbed 2. (% to 7, . 167.
The S&P (rose 4.) (% to 2,) . 61.
Oil managed a moderate 3.3% gain on the back of a smaller than expected build in US inventories. But a massive supply glut is building globally due to
Saudi Arabia’s price war with Russia .
The price of gold fell 1.5% as the Dow gained, while digital asset bitcoin hung around $ 6, . Short-term Treasury yields dipped into negative territory
Economist Warns Stock Market Rally May Just Be Exit Opportunity for Wall Street
Despite the rapid spread of the coronavirus in the United States and Europe , President Donald Trump continues to push for a resumption in US economic activity. But this decision will ultimately rest with state governors.
Optimism about the U.S. response to coronavirus triggered the biggest single-day Dow Jones point gain in history on Tuesday , and risk-on sentiment held firm on Wednesday even as the US case toll surpassed 90,
Allianz Chief Economic Adviser Mohamed A. El-Erian is concerned that the bounce in the Dow is not representative of a significant trend change in the index
For markets, the encouraging bounce in risk assets on Tuesday, which included the best day for the Dow Jones Industrial Average since , may be best viewed as an up-in-quality positioning opportunity rather than an all-clear market signal.
US Deficit Could More Than Double This Year
Soaring unemployment and stagnant economic activity have prompted the government to piece together (a historic bailout package for corporations and citizens alike
.) Businesses received a $ 2.3 trillion tax cut from the Trump administration in , blowing a massive hole in an already unwieldy debt pile.
U.S. growth did not come close to paying for this .
Many of these companies spent a large portion of this free-cash on stock buybacks
The US fiscal deficit was already on course to top $ 1 trillion this year. Even in a best-case situation where President Trump gets his wish and we start to see the economy tentatively re-opening at some point in 2Q , we will still likely have some form of social distancing and restrictions. Either way, this means the economy still contracts sharply this year and implies a possible deficit in excess of $ 2.5 trillion.
A heavy debt burden can be problematic for a country. The deflationary situation in Japan
US policymakers will be desperate to avoid a lost decade. But with talk of even more financial support on the way and growth forecasts flirting with depression levels, the national debt is only going to increase.
Dow 48: Boeing Flies on Bailout Expectations
It was a tremendous day in the Dow , and another monster performance for Boeing ensured that there were big gains in the index.
Flying more than 48% on Wednesday alone, BA stock now trades at $
The catalyst for this move was news that companies with “national security interests” will receive bailout support from Congress, though Boeing was not named specifically
Money for domestic airlines also helped propel the aerospace manufacturer’s stock higher.
Elsewhere, credit card companies rallied strongly as American Express ( %) and Visa ( 7%) cheered the arrival of government cash into the hands of consumers around the country as soon as the first week of April.
Nike jumped (% on similar hopes of increased spending.)
This article was edited by (Josiah Wilmoth)
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