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White House Watch – Finally, Relief for the Dow

Sure, last week was the worst for stocks since the financial crisis and there was more bad virus news from around the world, but for those looking for any tiny bit of good news, how about that buying surge at the end of Friday’s trading?

What was it that at 3:44pm ET triggered that wave of opportunism, 622 points worth of optimism in a quarter hour?

The end-of-the-week Dow close at 25,409.36 as well as the S&P and Nasdaq were all about 13% below their high points which had occurred all the way back to – the prior week. So last week was one to remember, unless this week is worse. And as the Centers for Disease Control’s Nancy Messonnier – whom one congressman Thursday called the “truthteller” – repeated Friday, it will get worse.

“Ultimately, we expect we will see community spread in the United States,” she told reporters. “It’s not a question of if this will happen, but when this will happen, and how many people in this country will have severe illnesses.” She is the director of the National Center for Immunization and Respiratory Diseases.

Ranked by the effect on the markets, the day’s No. 2 statement in impact and significance was the one at 2:30pm ET from Federal Reserve Chair Jay Powell hinting at a rate cut, issued as a tweet. Though stocks had only a momentary blip up in the context of another afternoon plunge underway at the time, the 30-year Treasury bond yield showed an appreciable increase. The 10-year went the other way.

Late in the afternoon, the CME FedWatch tally of Fed fund futures had rocketed up to a more than a 90% probability of a half-point cut to happen in less than three weeks.

“The fundamentals of the US economy remain strong,” said Powell’s one-paragraph statement. “However, the coronavirus poses evolving risks to economic activity.”

Powell went on to state the obvious: “The Federal Reserve is closely monitoring developments and their implications for the economic outlook.”

Finally, the 13 words that several Fed watchers had been predicting would come by Sunday evening, before the Asia markets reopened, but instead was delivered on Friday afternoon.

“We will use our tools and act as appropriate to support the economy.”

Not exactly in-depth analysis and not too definitive, but it filled the specifications widely anticipated, to show Powell is in fact, awake and aware of what everyone expected.

Will a rate cut – of any size – help constrain the spread of virus or delay a collapse of demand it threatens should American consumers be scared indoors? It’s enough, was the consensus, to assume a rate cut or two won’t hurt.

Earlier, as chronicled on the @macenewsmacro Twitter feed, St. Louis Fed President Jim Bullard told an audience in Fort Smith, Ark, that he is leaning against a rate cut any time soon unless the virus spread becomes a true pandemic.

Next in line for statements of significance might have been Goldman Sachs’ prognostication about the Fed being forced to cut 50 to 75 basis points this year. It hit hours before the Fed statement and for a time did seem to have a noticeable effect though it was soon lost in the morning cascade of falling shares.

Fifth, the White House’s markets fireman, economic policy coordinator Larry Kudlow, appeared in the White House briefing room in the morning as he often does on days stocks take a hit. His comments, like those he delivered later at the CPAC gathering of conservatives – where every other top administration officials had to check in – that no one should be panicking, were mostly disregarded in the markets. Democrats pounced on the remark of Kudlow’s colleague, acting White House Chief of Staff Mick Mulvaney, that his advice would be to turn off the TV.

The scariest of the day’s declarations was, hands down, Wharton Prof. Jeremy Siegel telling CNBC the virus crisis could drag down earnings this year as much as 30%. Next year, though, a rebound.

Finally, President Trump, on his way to another MAGA rally, this one in North Charleston, approached the rope-lined reporters late in the afternoon to say, “Almost everybody that we see is getting better – and it could be everybody.”

He continued with a mélange of virus optimism, political attacks, castigations of the news media and a comment that the administration is looking at additional restrictions on arrivals from additional countries other than China.

“We’re looking at a couple of countries, a few countries that have a little bit disproportionately high numbers and we’re going to make that decision very soon,” he said.

Trump suggested he is not getting enough credit for stopping arrivals from China early on. “I made one decision that was a very important decision and that was to close our country to a certain area of the world that was relatively heavily infected and because of that we’re talking about 15” Americans infected, among the 60 patients affected when repatriated Americans are included.

He went on before turning to board the Marine One helicopter for the first leg of his trip to the evening’s MAGA rally. “Some people have given us credit for that and some people aren’t, but the only reason, it’s political – is politics. So speaking of politics. I’m going to South Carolina. I think we’re going to do fantastically there.”

“We seem to be all getting better. One is questionable. And had that decision not been made? It could be a much different story,” he said.

He repeated what he said Wednesday night, in the press conference where he placed Vice President Mike Pence in charge of the anti-virus effort, that part of the market turmoil is the fault of Democrats.

“I think it’s just people don’t know, it’s the unknown. You know, they look at it and they say how long would this last?” he said, adding, “I think they’re not very happy with the Democrat candidates when they see them. I think that has an impact and we think we’re going to win easily. But you never know. It’s an election.

Denny Gulino

Julie Ros

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