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Mark O' Donnell
 · 
Research Analyst
June 11, 2020
 · 

Stocks tumble after FED meeting and Jobless Claims

Stocks tumble as much as 7% after FED meeting and Jobless Claims

Stocks tumble as investors' optimism is crushed on the dovish tone from Jerome Powell's meeting yesterday. The NASDAQ continues to drop, currently at 4.8%. The Dow Jones at the SP500 is down 7% and 6%, respectively. Big tech, a leader in the bull market, could not withstand the sell-off, down around 4%.

SP500 (Blue), Dow Jones (Red), NASDAQ (Orange)

Powell scaring stock investors away

Powell's message to the Stock Market was summarized in one statement yesterday – "We're not even thinking of raising rates." He believes the toll from the Coronavirus will continue to weigh on the economy for a prolonged period, requiring accommodative financial conditions. However, his answers to press questions suggested that negative interest rates were off the table for the FED. This may indicate that they will likely keep that printer working overtime to help the economy recover. The USD may see some deflationary pressure over the long run.

However, with the FED essentially pledging to help the American economy at whatever cost, the sell-off may be a general reaction to Powell's dovish statements yesterday. With asset purchases predicted to be at around $120B per month, investors may find the selloff as a good entry point for a potential bullish run on the back of FED support.

Unemployment still front and center

There are tentative signs of the American economy slowly starting up again. Unemployment claims fell to 1.52 Million last week, showing signs of American citizens going back to work. However, with a record 6.65 Million applying for unemployment benefits in early March, we may have just adjusted our eyes to seeing the world million with unemployment claims. However, as a whole, we should not take it as a positive sign for the medium-term prospect of the US economy. 1.52 Million applying for unemployment is still terrible, with 20.9 Million still receiving unemployment benefits.

The second wave is still on the table, with states such as Texas, Florida, and Arizona seeing jumps in Coronavirus cases as people start going about their daily lives. However, as cases arise, the Government Coronavirus task force has been set to weekly meetings instead of the previous regular meetings. It's said that President Donald Trump has not attended these meetings since late April.

However, it would be unfair to single out the United States government performing poorly during this Coronavirus pandemic. The government's delayed response has given the UK one of the worst death rates from the Coronavirus in the world. This has caused the public to lose confidence in Prime Minister Boris Johnson's government. From a senior advisor breaching lockdown rules to Boris contracting Coronavirus after shaking hands with patients who had Coronavirus, the UK mirrors something like that of the United States. The UK has chosen to try and contain the virus, loosening lockdowns hoping the NHS can cope with the rate of infections. The FTSE 100 is down 4% today.

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