Stock markets on Wall Street closed in the green on Monday after the number of newly discovered coronavirus cases in the country continued to decline slightly on a daily basis. Meanwhile, the United States Federal Reserve revealed earlier in the day that it “will establish a facility to provide term financing backed by PPP (Small Business Administration’s Paycheck Protection Program) loans.”
Fed to Establish Term Funding Facility for Small Businesses
What actually happened, is that the Fed announced it will create this facility by providing term financing.
“To facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve will establish a facility to provide term financing backed by PPP loans.”
Also, let’s not forget that the Fed already implemented a slew of measures to curb the negative economic effects of the COVID-19 pandemic.
It introduced open-ended asset purchases and an array of other measures including the Term Asset-Backed Loan Facility to help the economy and a $300 billion program to help small businesses lend money.
The central bank said that it wants to help the markets get through the coronavirus economic crisis and added it will continue asset purchases “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
The decision, which was brought by the Federal Open Market Committee unanimously, also directed the New York Federal Reserve Bank’s Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 0.25%. The FOMC also put a limit of $30 billion on overnight repo operations at an offering rate of 0%.
The Dow Jones Industrial Average index jumped on Monday by 7.73%, or 1,627 points, at the closing bell, pulled up by Boeing‘s gain of 19.2%. The Nasdaq 100 increased by 7.35% at the end of the trading session, as Ulta Beauty rocketed by 20.29%. The S&P 500 climbed 7.03% at the close as clothing company PVH led the gains, surging by 28.3%.
Buyers Starting Taking Control
Meanwhile, the Trump administration commented earlier that there are signs of stabilization in hospital rates. That also helped to lift Wall Street sentiment on Monday. New York State reported 594 new coronavirus deaths on Sunday, fewer than 630 on Saturday, marking the first daily decline in coronavirus-related deaths.
Tom Lee, head of research at Fundstrat, said in a note to clients:
“Incoming data suggests NY state might peak sooner than Cuomo’s optimistic case. With better visibility on the healthcare crisis in the US, particularly, on a potential to model a national peak, we believe buyers are now taking control.”
However, the U.S. is by far the country with the most cases at over 330,000. Marc Chaikin, CEO of Chaikin Analytics said:
“If we are fortunate to see an effective treatment there will be plenty of capital gains opportunities. For me capital preservation is more important than capital gains. Use sharp bear market rallies, like we saw last week, to raise sufficient cash to enable you to withstand further declines without panicking.”
Also, there is another important instance. Even though the government started sending out $1,200 in stimulus relief money, many Americans already say it won’t be enough and that they will need another round.
Americans Need More Stimulus Checks
A survey from SimplyWise, a retirement income technology company, found that 63% of respondents said they will need new stimulus checks. Currently, the government is making one-time payments of $1,200 to individuals and $2,400 to couples. However, the thing is, that approximately 10 million Americans filed for unemployment in the past two weeks. Meanwhile, $1,200 won’t cover monthly rents in many parts of the country.
Mark Mazur, director at the Urban-Brookings Tax Policy Center said that in order to secure additional stimulus checks, Congress would need to pass new legislation.
He noted that this process could be relatively quick because they now have a precedent for how to structure those payments.