The impacts of the stimulus package on the corporate sector

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Commenting on the stimulus package and today’s trading Gorilla Trades strategist Ken Berman said:

While the scary last-minute selloff could spell trouble for bulls, the fact that stocks held on to yesterday’s gains is already a positive surprise. We saw the first two-day winning streak in the Dow for the first time in two over three weeks, but volatility remains extremely highs and the Nasdaq’s relative weakness might already signal the end of the oversold rally.

 

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Q4 2019 hedge fund letters, conferences and more

The majority of stocks added to yesterday’s lofty gains thanks to the stimulus deal reached in Washington, with the Dow leading the way higher again amid Boeing’s (BA, +30%) historic rally. The Dow Jones Industrial Average (INDEXDJX:.DJI) was up 496 or 2.4%, to 21,201, the Nasdaq (INDEXNASDAQ:.IXIC) lost 34, or 0.5%, to 7,384, while the S&P 500 (indexsp:.inx) fell by 28, or 1.2%, to 2,476. Advancing issues outnumbered decliners by a 4-to-1 ratio on the NYSE, where volume was extremely high again.

Details Of The Stimulus Package Still Unknown

While the exact details of the stimulus package are still not known, eligible taxpayers will receive a check of over $1,000, with a further $250 billion being set aside for unemployment insurance benefits. As for the corporate sector, the rumored $500 billion bailout fund will require firms to halt stock buyback for a full year after the government loan is paid back and suspend dividend payments until the loan is outstanding. Yet another $350 billion will likely go towards small business loans, and coupled with the Fed’s unlimited quantitative easing program, the package is by far the biggest in the country’s history.

Even though the steep selloff in the last 20 minutes of trading made today’s session a mixed one for bulls, most of the key sectors finished the day in the green, with the one crucial exception, the tech sector. The Dollar Index (DXY) declined for the third day in a row, as investors turned more optimistic about the length of the global lockdowns and the state of the global financial system. While the optimism might turn out to be short-lived, the period of forced liquidations could be over and markets could continue to normalize in the coming days.

Prince Charles Tests Positive For the COVID-19 Virus

Credit and currency markets had another crazy session, with especially high-yield corporate bonds and the Great British pound experiencing volatile swings. Investors tried to gauge the impacts of the stimulus package on the corporate sector, and high-yield bonds continue to be the most vulnerable to the crisis. The U.K reported a huge jump in the number of infections and the fact that Prince Charles, the heir of the British crown also tested positive for the COVID-19 virus also weighed on investor sentiment in the country.

The weekly number of new jobless claims will be very closely watched by investors tomorrow, as analysts forecast an unprecedented jump to 1.5 million in the measure, with a lot of experts calling for an even bigger increase. The final reading of the fourth-quarter GDP is expected to come in at 2.1%, and we will also get the goods trade balance and wholesale inventories just after the opening bell. The Bank of England (BOE) will hold its monetary meeting during the pre-market session, but analysts don't expect further easing from the Central Bank in the wake of its recent emergency steps. Stay tuned!