Stocks are flat or lower today. Investors are waiting for Fed Chairman Powell’s news conference after central bank concludes its two-day meeting.
- The IBD/TIPP Economic Optimism Index in the US fell to 47 in June, the lowest since September of 2016. It is the weakest reading under President Trump’s administration as Americans turned more pessimistic about their personal finances (-3.1 to 49.8) and the federal policies sub index sank 5.1 points to 48.7. The outlook for the US economy was nearly unchanged (42.4 from 42.3), even as states let businesses reopen, employment jumped and the coronavirus stock market rally kept running. Also, there’s an unusually large gap between how self-described stock-market investors and non investors feel about the outlook for the US economy, with stock market investors modestly optimistic (52.8) and non investors deeply pessimistic (42.1). Among income groups, only those earning above $75,000 remain optimistic (51.3). Pessimism is greatest among those earning below $30,000 (42.7) as job losses have been concentrated in lower-wage industries.
- The Federal Reserve expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The central bank lowered the minimum loan size for certain loans to $250,000 from $500,000; increased the maximum loan size for all facilities; increased the term of each loan option to five years, from four years; extended the repayment period for all loans by delaying principal payments for two years, rather than one; and raised the Reserve Bank’s participation to 95% for all loans. The program intends to purchase 95% of each eligible loan that is submitted and the Fed is working to include loans for nonprofit organizations. The Fed move came just ahead of a monetary policy decision on Wednesday with policymakers likely to keep the fed funds rate steady at 0-0.25% and re-commit to using the full range of tools.
- The NFIB Small Business Optimism Index increased to 94.4 in May of 2020 recovering from a 7-year low of 90.9 in April and above consensus of 86. Still, the reading remains below 95, a level not seen since 2016 as the activity remained depressed due to COVID-19 restrictions. Sales expectations for the next six months increased 18 points to -24, rebounding from a record low of -42, the lowest level in the survey’s 46-year history. Expectations for better business conditions also went up by 5 points to -34 as owners are optimistic about future business conditions and expect the recession to be short-lived.
- The Eurozone economy shrank by 3.6% quarter on quarter in the first three months of 2020, compared with preliminary estimates of a 3.8% contraction and the previous period’s 0.1% growth. It was still the steepest contraction on record as a coronavirus lockdown from mid-March forced non-essential businesses to close and consumers to stay at home. Among the bloc’s largest economies, Germany’s GDP contraction was the sharpest since 2009, while France, Spain and Italy economies shrank the most on record. Germany, France and Italy all entered a recession.
- On Tuesday: European stocks ended lower after the World Bank warned that the global economy this year will see the deepest recession since World War II. US stocks have moved significantly higher over the past several sessions but gave back some ground on Tuesday, although strength among technology stocks lifted the tech-heavy Nasdaq to a new record high. Asian stocks turned in a mixed performance as investors exercised caution after recent strong gains on hopes for a quick economic recovery from the coronavirus induced downturn
- Tuesday’s data below:
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