Markets snap back on hopes that banks will cut interest rates
This week’s trading began Sunday evening with Dow futures swinging like a pendulum between positive and negative as investors watched for any hint that U.S. Fed Chair Jerome Powell will cut interest rates. Though the coronavirus persists, particularly outside China (new cases in China have been declining since last week), lower rates would boost investor confidence.
Wall Street, including Goldman Sachs, expects the Fed to cut rates by 50 basis points by its March 17-18 meeting. GS expects an additional 0.5% cut after that. (The Fed cut rates three times in 2019.) But would a cut offer a lasting solution to slumping stocks or is it a short-term sugar high?
Whatever the outcome, Monday markets soared on those hopes. The Dow leapt 5.1% while the Nasdaq and S&P weren’t far behind. Both WTI and WCS spiked over 2.5%, while gold jumped about 5%. The TSX rose a more modest 1.78%, which would be significant on any other day. Tech led the charge with Apple rallying over 9% and Microsoft up 6.65%. In Canada, safe-haven gold stocks like Premier Gold enjoyed a 7.26% rise while utilities such as Brookfield Renewable Energy rose 7.7%. The VIX slumped nearly 17% on Monday, but there will likely be volatility down the road.