From Market Insider
- US equities erased losses and turned higher on Monday afternoon after the Federal Reserve announced it would begin individual corporate bond purchases.
- The bond-buying activity comes nearly three months after the central bank first unveiled its lending programs. The March 23 announcement marked a floor for stock prices and fueled a strong rebound through the following weeks.
- Oil reversed intraday losses as well, with West Texas Intermediate crude rising as much as 2.8%, to $37.26 per barrel.
US stocks erased losses and closed higher on Monday after the Federal Reserve announced it will begin purchases of individual corporate bonds.
The central bank will begin taking in bonds through its Secondary Market Corporate Credit Facility on Tuesday, roughly three months since it first revealed the program and subsequently backstopped risk assets. Purchases will be made to form a portfolio “based on a broad, diversified market index of U.S. corporate bonds,” according to a press release.
The Fed also opened its Main Street Lending Program and is encouraging banks to make loans to eligible small- and medium-sized businesses.
Here’s where US indexes stood at the 4 p.m. ET market close on Monday:
- S&P 500: 3,066.59, up 0.8%
- Dow Jones industrial average: 25,763.16, up 0.6% (158 points)
- Nasdaq composite: 9,726.02, up 1.4%
Equities tanked at the start of the day amid renewed fears of a second wave of coronavirus cases. Nearly half of the 50 US states are seeing a rebound in infections as reopenings continue. North Carolina and Texas reported record hospitalizations on Saturday, while Florida, California, and Alabama post sharp increases in daily cases.
Airline stocks led early losses and failed to match the market’s broad afternoon upswing. United and American slid, while Royal Caribbean and Norwegian Cruise Lines fell as well. Traders continued to bet against travel activity surging back to past norms.
Popular bankruptcy-play Hertz slid after the car-rental chain filed to sell $500 million in stock. The struggling firm has seen violent price swings through recent sessions as retail investors bet on a miraculous recovery from severe indebtedness. The new stock offering gives Hertz a preferable fundraising option, though the company warned investors the shares “could ultimately be worthless” if it goes under.
Shopify soared after inking a partnership with Walmart to help small businesses sell products online. Walmart plans to add as many as 1,200 Shopify sales to its platform by the end of 2020, according to a blog post.
Despite rising case counts throughout the US, Morgan Stanley economists doubled down on their bet for a V-shaped recovery in a Sunday note. The firm told clients it expects global gross domestic product to rebound to pre-pandemic levels by the end of the year. Even if a second wave of cases threatens the recovery, the bank’s base-case sees “selective lockdowns” keeping the world economy from plunging further into recession.
Monday’s leap follows a modest increase to close out last week. Friday saw all three major indexes trend higher to retrace some of Thursday’s losses. The University of Michigan’s consumer sentiment survey showed optimism jumping the most since 2016 in June as positive rehiring figures boosted hopes for a labor-market recovery.