* Major indexes up 3.9%-4.5%; Dow out front
* All sectors green; Healthcare leads, energy lags
* Dollar up, gold, crude flat; U.S. 10-Yr T-Note yield ~1.04%
March 4 - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Chuck Mikolajczak. Reach him on Messenger to share your thoughts on market moves: charles.mikolajczak.thomsonreuters.com@reuters.net
STOCKS RALLY ON CENTRAL BANKS, BIDEN BOOST (1605 EST/2105 GMT)
Major indexes rallied on Wednesday, as a series of victories for former Vice President Joe Biden in Super Tuesday voting dented Bernie Sanders chances of becoming the Democratic presidential nominee, while central banks appeared to be coordinated in combating the coronavirus.
Biden was poised to win 10 of 14 states and is seen as the favored candidate of the party by Wall Street given his more moderate economic views. of coordinated central bank action to counter economic slowing caused by the coronavirus also provided support, with the Bank of Canada on Wednesday following in the footsteps of the Fed and Bank of Australia on Tuesday in cutting interest rates.
Stocks accelerated higher into the close, with the S&P 500 .SPX climbing 1.2% in the last hour of trading. Gains were led by the healthcare sector .SPXHC , which at 5.8%, saw its biggest one-day rise since November 2008. The defensive utilities .SPLRCU and consumer staples .SPLRCS sectors climbed at least 4.9%.
Below is your closing market snapshot:
(Chuck Mikolajczak)
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THE CONSUMER REMAINS THE KEY (1357 EST/1857 GMT)
While the effect of the coronavirus on business has dominated investor attention, the effect it has on U.S. consumers is likely to be more important, according to Stifel's head of institutional equity strategy, Barry Bannister.
Bannister said that "consumers are the fulcrum on which recessions turn" and with this being the "first virus of the social media and sensationalized mainstream media age" the economic risk is in the hands of the consumer.
With the Conference Board's consumer sentiment indicator looking "toppy" according to Bannister, other consumer indicators such as retail sales and company comments that may point to a consumer retrenchment, are seen as a risk to monitor.
Also of note, defensive sectors relative to cyclicals have begun to break out, and in four prior instances since 1997, the S&P 500 .SPX did not bottom until that ratio peaked, although not all led to a recession.
Should the consumer indeed retrench, Bannister estimates the 12% decline in the S&P since Feb 19 discounts only about half of the recession risk. Still, this is not yet Stifel's view, as the firm maintains its 3,450 target for year-end 2020.
(Chuck Mikolajczak)
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CHECKING THE FED'S AMMO (1241 EST/1741 GMT)
Nicholas Colas, Co-founder of DataTrek Research, is out with some commentary on Tuesday's 50-basis point Fed rate cut.
According to Colas, Fed Funds Futures (FFF) knew a rate cut was coming back on Sunday evening, which is one reason U.S. stocks surged on Monday. Indeed, Colas' view is that FFF are wiser on the direction of rates than Wall Street economists or Fed officials.
In any event, as Colas sees it, this cut is different from every other examples of a crisis driven intra-meeting reduction, such as in 1998, 2001, and 2008. He says that in no other case did Fed Funds have a 1.x handle. As Colas puts it, "if one likens 25 bp rate cuts to 'bullets', then the Fed just shot 2 and only has 4 left in its old-timey six shooter."
Colas believes FFF understand that problem, but still assume the next rate cut (25 bps) will come sooner rather than later. He says odds for the April 29th meeting are 51% and 63% for June 10th, although split between rates being 25 bps lower (51%) and 50 bps lower (12%). Meanwhile, he says December's FFF prices show the highest probabilities for 1 more cut this year (42%) or two (28%).
The bottom line to Colas is that markets understand the Fed is running low on ammunition, so this means of juicing equity prices is close to exhaustion. He says that what's left now is for the Fed to flex bank regulatory policy to ensure adequate capital to businesses temporarily affected by the coronavirus.
Colas also notes that in the Fed's 2020 Stress Test, its "severely adverse scenario" includes 10-Year Treasury yields going to 0.75%. The yield hit 0.9060% Tuesday and now stands at about 0.9800%.
(Terence Gabriel)
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ADP (NASDAQ:ADP), SERVICES PMI, MORTGAGES: DATA SHOWS STRONG ECONOMIC VITAL SIGNS (1115 EST/1615 GMT)
Data released on Wednesday provided some assurance that the U.S. economic expansion still has wind in its sails even as coronavirus worry has market participants bracing for rough seas.
Private U.S. employers added 183,000 workers to their payrolls in February USADP=ECI according to payrolls processor ADP, 23,000 more than analysts expect Friday's more comprehensive jobs report from the Labor Department to show. as Ian Shepherdson, chief economist at Pantheon Macroeconomics, points out, "these numbers now are old, pre-Covid 19 data," adding that "prudence suggests we have to expect softer jobs numbers for the next few months."
In a separate report, the U.S. services sector USNPMI=ECI expanded last month at a faster pace than economists predicted, according to the Institute for Supply Management's (ISM) non-manufacturing purchasing managers index (PMI). index posted a reading of 57.3, the highest reading in a year as a rise in new orders and employment components offset slowdowns in prices paid and business activity.
A PMI number over 50 indicates expansion.
"Most respondents are concerned about the coronavirus and its supply chain impact. They also continue to have difficulty with labor resources," writes Anthony Nieves, chair of ISM's non-manufacturing survey committee. "They do remain positive about business conditions and the overall economy."
Survey respondents' sentiment was mixed.
"The outlook appears positive, as our order book is nearing full capacity for the first half of 2020," says one, while another noted "it is difficult to make sourcing decisions, since it is not clear how long China will need to return to normal production capacity."
Finally, a drop in interest rates prompted a 15.1% surge in mortgage demand last week, according to the Mortgage Bankers Association.
The average 30-year fixed contract rate USMG=ECI dropped 16 basis points to 3.57%, the lowest in seven years.
This led to a surge in applications to refinance existing mortgages USMGR=ECI , which easily overshadowed a dip in demand for home purchase loans USMGPI=ECI .
"Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize," says Mike Fratantoni, chief economist at MBA.
Investors were in a buying mood in morning trading after moderate Democrat Joe Biden's strong showing in the "Super Tuesday" primary contests gave a boost to healthcare stocks.
All three major U.S. stock averages were firmly in the black.
(Stephen Culp)
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EMERGENCY CUTS AND MARKET PERFORMANCE (1035 EST/1535 GMT)
In a post https://lplresearch.com/2020/03/03/first-emergency-rate-cut-by-the-fed-since-2008 late Tuesday, LPL Financial's senior market strategist Ryan Detrick looked at the historical performance of the S&P 500 .SPX in the wake of emergency rate cuts. The Federal Reserve cut rates by 50 basis points Tuesday in response to the coronavirus.
The move was likely measured to increase the impact of the decision, according to LPL, which the firm believes is best compared to the rate cut in 1998 in response to the Russian financial crisis and collapse of hedge fund Long-Term Capital Management, rather than the recessionary cuts in 2001, 2007 and 2008.
"The Fed's perspective on the evolving crisis has changed quickly," said Detrick. "Even after the emergency action, the bond market is still pricing in more cuts by July."
Looking at the seven emergency rate cuts prior to yesterday, noting that before 1994 the central bank did not change policy around a meeting schedule, making them all effectively unannounced, the firm found a mixed bag of performance for stocks.
Not including yesterday's performance, the S&P rose 1.2% the day of the rate cut, on average, according to LPL. However, it was down 0.7% on average the next day and 0.8% lower the next week. By the next month, however, the benchmark index was up 2.9% and up 1.4% three months later, on average.
(Chuck Mikolajczak)
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S&P 500: MAY BE ZIGGING AND ZAGGING (0915 EST/1415 GMT)
Since falling to a low on Friday, the S&P 500 .SPX has seen a violent choppy recovery. Indeed, the SPX has retraced about 52% of its February slide into Tuesday's post-surprise Fed rate-cut high.
However, that action may simply be part of a zig-zag, or 3-wave corrective bounce (Elliott Wave basis), prior to a return of more sustained downside pressure.
Last Friday, after falling to a low of 2,855.84, and testing its October trough at 2,855.94, the SPX reversed to the upside. (Click on chart below)
Since then, the SPX hit a high of 3,136.72 on Tuesday, prior to selling back to a low of 2,976.63.
Volatility remains elevated and with CME E-Mini S&P 500 Futures EScv1 suggesting a more than 50 point bounce at the open, the SPX can once again thrust back above its 200-day moving average (DMA) (now about 3,050) at the open.
If this push is the final swing of a 3-wave structure, strength should ultimately fade and the index can then decline to new lows. hurdles above 3,136.72 are the 61.8% Fibonacci retracement of the entire February slide (3,188.13) and the 3,214.64/3,214.68 area (the January Middle East tension and initial coronavirus panic lows). The 50-DMA is now about 3,260 and the 76.4%/78.6% Fibonacci retracements of the February decline are at 3,266.63/3,278.46.
Of note, after peaks in early and late 2018, the SPX did retrace about 79% and 63% of initial slides before more pronounced weakness returned.
Immediately breaking 2,976.63 may suggest bears are back in control.
(Terence Gabriel)
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STOCKS POISED FOR BOUNCE AFTER SUPER TUESDAY (0839 EST/1339 GMT)
Equity index futures are pointing to a strong open on Wednesday, putting indexes in place to bounce from Tuesday's declines. This in the wake of a surprise Fed rate cut, as well as a strong performance by Joe Biden in the biggest day of voting in the U.S. Democratic presidential nomination campaign on Tuesday.
Biden rolled to victories across the South, Midwest and New England, winning 9 of 14 states on "Super Tuesday," setting up a one-on-one battle against Bernie Sanders. the coronavirus outbreak has been at the forefront of investor psyche in recent weeks, the upcoming U.S. presidential election has been an undercurrent, with the market notably dipping when candidates seen as less friendly to Wall Street, such as Sanders and Elizabeth Warren, saw upward swings in polls.
The S&P 500 .SPX dropped 2.8% on Tuesday, after the Fed announced an emergency rate cut of 50 basis points to leave the target range at 1.00% to 1.25%, putting the benchmark index down 11.3% from its Feb 19 record. is your premarket snapshot:
(Chuck Mikolajczak)
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https://tmsnrt.rs/2PMF6VR SPX03042020
https://tmsnrt.rs/3asERXM ADP Image
https://tmsnrt.rs/2TmCOyT ISM services PMI Image
https://tmsnrt.rs/3avgLMm Mortgages Image
https://tmsnrt.rs/2IlwOQy Closing levels March 4
https://tmsnrt.rs/32SANNT
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