The Fed has recently announced this week that they plan to maintain interest rates until the U.S. is confident in its economic recovery. The Dow futures have plummeted more than 500 points this week eradicating the hopes of another rally.
This week, Wall Street has surprised investors with companies surging despite reports of filing for bankruptcy and it looks like they have something else to look forward to—the Fed announcements.
According to their released reports, it is expected that the GDP for this year tumbling 6.5% in 2020 but bouncing back at 5% in 2021. The Fed also noted that unemployment rates for this year will be at 9.3% while in 2021 and 2022 will have an estimate of 6.5% and 5.5%, respectively.
Nasdaq sets a new record, but Dow Jones continued to fall
Last week, the Dow Jones did its record rallies but now it seems the tables have turned. While both the Dow Jones and S&P 500 pulled back in yesterday’s trading day, Nasdaq sets a record reaching over 10,000 points.
Investors will be waiting for the jobless claims this week while most markets outside the U.S. are absorbing the negative GDP statement coming from the Fed.
Fed Chairman Jerome Powell stressed that the pace of the economic recovery still depends on the progress of eliminating the coronavirus in the next coming months. He also added that the economic projections should not be seen as official forecasts.
Danielle DiMartino Booth, CEO of Quill Intelligence and formed advisor to the Dallas Fed said, per CNBC:
“Analyzing the Fed’s economic projections at this time when much of the economy is still opening is riddled with uncertainties. This is an economic recession with no precedent.”
The Fed effect, U.S. pressure could attract growth in China’s market
Unfortunately, the Dow Jones and S&P 500 closed lower after the Fed statement after they announced the negative projections for 2020 caused by the coronavirus pandemic.
The central bank reiterated its commitment from the April meeting that it “expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
It also looks like that the fear for the coronavirus has struck America once again after reports coming in from Texas a lot of hospitalizations from COVID-19. With this in mind, China’s expectation of its recovering economy could backfire.
However, there have been also news coming in that the U.S. Congress is mulling a law that could make Chinese firms delist their stocks from American exchanges.
With the coronavirus cases are increasing globally it looks like it’s hitting the markets once again. Based on the data from Johns Hopkins University, worldwide cases have hit over 7 million with the U.S. hitting the 2 million mark.
Only time will tell if the Fed will be able to save the U.S. markets once again.
Featured image courtesy of Jack Moreh/StockVault