Adam Vettese, UK Market Analyst at eToro, has provided his daily commentary on traditional and crypto markets for June 16, 2020.
After opening sharply lower on Monday morning, US stocks staged a comeback over the course of the day, with the S&P 500 finishing the day 0.8% higher and the tech heavy Nasdaq Composite up 1.4%. Investors were buoyed by movements from the Federal Reserve, which said that it is expanding its bond buying program to include the debt of individual companies. Up until now, the central bank had only been buying ETFs in order to pump money into corporate bond markets.
The new program will allow the Fed to buy up to $750bn in corporate debt, and was initially announced back in March. Under the program, which starts today, the Fed will be buying individual investment grade bonds on the secondary market that have maturities of five years or less. The central bank also has a primary credit facility that will focus on buying investment grade bonds directly from firms, which is not yet operational. Bond buying, which helps keep markets running smoothly and provides companies with access to capital, is one of several actions the Fed is taking to confront the economic damage caused by the pandemic.
Financial names ride Fed intervention wave
All 11 sectors in the S&P 500 finished Monday in the green following the market comeback as the day progressed. Financials stocks were the biggest winner, gaining 1.4% overall, as investors viewed the Fed taking further steps to ensure the stability of the bond markets as positive for the sector. The consumer finance sub-sector climbed the furthest at 2%, but remains down 25% year-to-date. Only bank stocks have fared worse within the financials sector; they are down 31.9% year-to-date.
Tech stocks including Tesla and Electronic Arts helped the Nasdaq Composite to its 1.4% gain for the day, with the two firms closing 6% and 3.7% higher respectively. Tesla’s share price remains just below its all-time high $1,025 closing price from last Wednesday, however, following downgrades from analysts at Morgan Stanley and Goldman Sachs on Friday.
In the Dow Jones Industrial Average, which gained 0.6% on Monday, Raytheon Technologies, Goldman Sachs Group and American Express were the day’s biggest winners, all finishing the day more than 2% up.
- S&P 500: +0.8% Monday, -5.1% YTD
- Dow Jones Industrial Average: +0.6% Monday, -9.7% YTD
- Nasdaq Composite: +1.4% Monday, +8.4% YTD
BP expects to take a $17.5bn hit to value of its assets
Oil giant BP has cut its oil price forecasts for decades into the future, and expects the price of Brent crude to average $55 a barrel between now and 2050. As a result, the firm said that it expects to write down the value of its assets by £13.8bn, and will need to become a “leaner, faster-moving and lower-cost organisation”. The news follows an announcement from the firm last week that it plans to cut 10,000 jobs.
On Monday, the FTSE 100 fell by 0.7%. Similar to the US, the index opened sharply lower versus its Friday closing price, and recovered throughout the day. Miner Fresnillo, housebuilder Barratt Developments and airline easyJet fell hardest yesterday, closing the day 5.9%, 5.1% and 4.7% lower respectively. At the other end of the spectrum, distribution firm Bunzl, investment firm M&G and equipment rental company Ashtead Group topped the table. Further down the company size spectrum, the FTSE 250 was close to flat on Monday.
- FTSE 100: -0.7% Monday, -19.6% YTD
- FTSE 250: +0.1% Monday, -21.9% YTD
