Dow futures and coronavirus cases rise, experts warn financial bubble

Dow futures and coronavirus cases rise, experts warn financial bubble

Despite the U.S. reporting a heavy volume of COVID-19 cases, the Dow futures rose to start the week. Analysts are also cautious about the surge of money deposits.

Wall Street had a slump last Friday with the Dow Jones dipping slightly near one percent. The Dow futures were up around 50 to 100 points while the S&P 500 and Nasdaq 100 futures also traded in positive territory, as per CNBC.

News of the Federal Reserve continuing with their bond purchasing program kept the markets afloat despite the pullbacks. The U.S. also eased the Huawei ban so they could work together with 5G.

Outside the U.S., there has also been a report of a missing money scandal over at Wirecard in Germany, which caused their stock price to drop massively.

Recent data by the Federal Data Insurance Corporation (FDIC) also reported a $2 trillion [AU$ 2.9 trillion] surge in cash deposits since the coronavirus pandemic.

Businesses reopening versus the pandemic

In addition to the doubts of the Dow Jones, the coronavirus pandemic seems to have scared some businesses once again.

Last week, reports came in that Apple closed some stores in states that are seeing a resurgence in COVID-19 cases. A total of 11 stores will shut down in Florida, North Carolina, South Carolina, and Arizona.

Per Johns Hopkins University, the top five counties hit over 30,000 cases with Los Angeles and Cook taking the top spots hitting over 80,000.

Cruise lines also voluntarily suspended all trips until September 15 according to the Cruise Line International Association (CLIA). Members of the trade group include cruising giants such as Royal Caribbean, Carnival Corp., and Norwegian Cruise Line.

In effect of the announcement, shares of Carnival Corp. closed 5.2%, and Royal Caribbean stock dropped 6.9% while Norwegian Cruise Line slipped 5.6% lower.

Vito Racanelli, market intelligence analyst at Fundstrat Global Advisors said in a note as per CNBC:

“There’s a war going on between the bulls and bears, with each seizing every little data point to buttress their opposing arguments.”

U.S. Bank deposits surge amid the coronavirus

Aside from the massive deposit cashflow, the FDIC also reported strong loan growth among banks.

FDIC Chairman Jelena McWilliams said in its report that the banking industry has been a “source of strength for the economy in the first quarter” despite the hurdles. She also added that banks effectively supported individuals and businesses through lending.

However, some analysts are looking at this bank deposit boom as a recipe for disaster. CNBC reported that some experts are either seeing a possible collapse in the dollar or a stock market bubble in the making.

Brian Foran, an analyst at Autonomous Research observed that banks are flooded with cash. He also reiterated one immediate consequence that could happen if the money doesn’t move elsewhere: the banks are sure to lower their interest rates.

In addition, Stephen Roach, senior lecturer at Yale University told Bloomberg that “a dollar decline is inevitable.”

The crash of the U.S. dollar may greatly affect the Dow Jones and the rest of Wall Street. Traders and investors are faced with another possible bubble that is about to burst anytime soon.

Featured image courtesy of Alexander Mils/Pexels

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