The number of coronavirus cases in the U.S. has continued to march higher, with the outbreak ushering in a host of disruptions to individuals’ daily lives and businesses’ operations.
The financial market volatility stemming from the pandemic reached historic levels last week, with each of the S&P 500 and Dow posting their worst percentage declines since since 1987’s Black Monday late in the week. All three major indices are now languishing in a bear market, after sinking more than 20% from their recent record highs.
Amid the outbreak, U.S. officials increased their efforts to combat the economic fallout from the virus, unveiling further stimulus aimed at some of those most hit by outbreak-related disruptions.
In a press conference Friday afternoon, President Donald Trump declared the outbreak a national emergency, unlocking some $50 billion in funding that can be given to state and local municipalities to respond to the outbreak.
Trump also waived interest payments on all student loans held by federal government agencies until further notice, and instructed the Department of Energy to purchase large quantities of crude oil for the U.S. Strategic Petroleum Reserve – an effort to help support U.S. shale producers hit hard by the recent precipitous decline in oil prices.
And on Saturday, the House of Representatives passed a bipartisan bill to help provide further support in response to the coronavirus. The legislative package, which passed with a vote of 363-40, broadens access to free testing, expands sick leave benefits and helps provides food aid for vulnerable populations, including children whose schools have closed due to the coronavirus.
The Senate is expected to vote on the bill this week, and could take it up as soon as Monday. President Donald Trump wrote in a Twitter post that he “fully support[s]” the bill, saying at the time that he encouraged “all Republicans and Democrats to come together and VOTE YES!”
Federal Reserve meeting
Investors are betting that the Federal Reserve will also step in with more stimulus.
The Federal Open Market Committee (FOMC) is set to meet Tuesday and Wednesday for their scheduled March monetary policy meeting.
Over the weekend, market participants priced in a 100% probability that rates would be cut by another at least 75 basis points, according to CME Group. Such a move would escalate the monetary policy response after the Fed unexpectedly slashed rates by 50 basis points to between 1% and 1.25% on March 3.
Many economists believe the Federal Reserve will slash rates all the way to 0% at the low end of the target band, materially lowering the short-term borrowing costs for market participants as the coronavirus outbreak flares.
“We expect the FOMC will reduce the target range for the federal funds rate by 1 [percentage point] to 0.0-0.25% and signal it expects to maintain an exceptionally low policy rate for ‘some time,’” Barclays economists including Michael Gapen wrote in a note Friday. “This subjective forward guidance has historically been linked with a period of several quarters, in line with our expectation that the funds rate will remain at the zero-lower bound (ZLB) through year-end.”
Last week, the New York Federal Reserve had stepped in with additional liquidity operations to help support the recently tumultuous money markets, offering $1.5 trillion worth of short-term loans. The Fed also announced it will broaden out its purchases of $60 billion per month to include Treasury securities across all durations including long bonds, further injecting liquidity into Treasury markets.
At the end of the Fed meeting Wednesday, some economists expect the central bank will announce either an increase to its monthly purchase rate of Treasuries, or an extension to the length of time the program will continue.
Elsewhere, investors will also receive another batch of economic data releases, which are largely expected to reinforce the strength of the U.S. economy prior to the COVID-19 outbreak.
The Census Bureau’s February retail sales report will be one such release, capturing the period just before and at the start of the escalation of the number of confirmed coronavirus cases in the U.S.
Consensus economists expect retail sales climbed 0.2% month over month in February, slowing slightly from January’s 0.3% month on month rise.
“A price-related drop in gas station sales last month probably mostly offset a recovery in underlying retail spending, even with the latter boosted by panic buying in the last week of the month,” Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note Friday. “
“Excluding gas, autos, food and building materials, control group sales probably increased last month, following no change in January. The latter was linked to a 3.1% m/m decline in clothing sales, which is unlikely to have persisted,” he added. “There has also been some weakness in health and beauty store sales, which may have been given a lift in the last week of February by panic buying of products like hand sanitizer and tissues.”
Monday: Empire Manufacturing, March (4.9 expected, 12.9 in February), Net long-term TIC flows, January ($85.6 billion in December)
Tuesday: Retail sales advance MoM, February (+0.2% expected, 0.3% in January); Retail sales excluding autos and gas MoM, February (0.3% expected, 0.4% in January); Industrial production MoM, February (0.4% expected, -0.3% in January); Capacity utilization, February (77.1% expected, 76.8% in January), JOLTS job openings, January (6,401 expected, 6,423 in December); NAHB Housing Market Index, March (74 expected, 74 in February)
Wednesday: MBA Mortgage Applications, week ended March 13 (55.4% expected); Housing starts, February (1.502 million expected, 1.567 million in January); Building permits, February (1.500 million expected, 1.550 million in January); Federal Reserve interest rate decision
Thursday: Philadelphia Fed Business Outlook index, March (10.0 expected, 36.7 in February); Initial jobless claims, week ended March 14 (220,000 expected, 211,000 prior week); Continuing jobless claims, week ended March 7 (1.722 million prior week); Leading Index, February (0.1% expected, 0.8% prior week)
Friday: Existing home sales, February (5.55 million expected, 5.46 million January)
Tuesday: FedEx (FDX), Baxter International (BAX) after market close
Wednesday: General Mills (GIS), Nio (NIO) before market open; PagerDuty (PD), Trip.com (TCOM) after market close
Thursday: Accenture (ACN), Darden Restaurants (DRI), Lennar (LEN) before market open; Cintas (CTAS) after market close
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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