Too early to call bottom on US stocks

Business | 26 Mar 2020 11:09 am

Many on Wall Street say they don’t think stocks have hit bottom yet, but optimism increased after the White House and Senate leaders announced an agreement on the aid bill early Wednesday.

A vote had been expected in the Senate by the end of the day, but then some lawmakers balked at the proposed bill.

Republican Senators Tim Scott, Ben Sasse and Lindsey Graham demanded changes, saying the legislation as written “incentivizes layoffs” and should be altered to ensure employees don’t earn more money if they are laid off than if they’re working. Complicating the standoff, Senator Bernie Sanders of Vermont said he would block the bill unless the conservatives dropped their objections.

Investors were anxiously waiting the aid in the rescue package, which lawmakers hope will help blunt the blow to the economy as businesses shut down to slow the spread of the coronavirus.

“They’re hitting on all the right elements of what the U.S. economy needs during the shutdown to bridge itself to the other side to open up economic activity,” said Darrell Cronk, chief investment officer of Wells Fargo Wealth and Investment Management.

But even optimists say the package provides just the second leg of three that markets need to regain lasting confidence. The Federal Reserve and other central banks are also offering tremendous aid by cutting interest rates and supporting lending markets, but investors say they need to see the number of new infections peak before they can feel comfortable knowing how deep the looming economic downturn will be.

“There’s a lot of bad news, there’s very little tangible good news and there’s a lot of uncertainty in between,” said Jack Ablin, chief investment officer at Cresset.

Investors are also still waiting to see the details of Washington’s plan, which will include direct payments to most Americans and aid for hard-hit industries. It’s unclear when the House of Representatives could vote on the plan.

“It’s too early to call a bottom because there’s way too much uncertainty,” said Tony Rodriguez, head of fixed income strategy at Nuveen.

“The bottom implies it’s not going lower, and I don’t think that,” he said. “For it to become a bottom, you would need to see much better news coming out on the health care side of this.”-AP

 

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