Friday 10 April 2020

Stocks rise on Fed move but March low could still be retested

Markets rose on Thursday.

The S&P 500 rose 1.5 percent, the STOXX Europe 600 jumped 1.6 percent and the Shanghai Composite rose 0.4 percent.

However, oil prices plunged. West Texas Intermediate crude tumbled 9.3 percent and Brent fell 4.1 percent.

Helping to prop up stocks prices on Thursday was an announcement by the Federal Reserve of its US$2.3 trillion programme to bolster local governments and businesses.

That comes as a report on Thursday showed that 6.6 million Americans filed for unemployment last week and another showed that the preliminary reading of the University of Michigan's consumer sentiment index fell to 71 in early April from 89.1 the previous month, the biggest ever one-month decline.

“The Fed will buy riskier debt and that should keep this V-shaped rebound going a little longer,” said Edward Moya, senior market analyst at OANDA New York.

However, others remain cautious.

“There has to be a capitulation where everyone throws their hands in the air and sells it all, gets rid of the hopes and dreams they had for the stocks in their portfolio,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Management.

Similarly, Mark Hulbert at MarketWatch noted that instead of the pessimism and despair usually seen at bear-market bottoms, the last couple of weeks have been marked by an “eagerness to declare that the worst is now behind us”.

“We should expect a retest of the market’s March low,” Hulbert concluded.

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