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March 25, 2020

Senate Agreement on $2T Stimulus Package Spurs Market Optimism

 

The Senate reached a deal on a stimulus package. Senators and the Trump Administration reached an agreement overnight on a $2 trillion stimulus package aimed at curbing the virus impact on the US economy. The package includes tax breaks, direct payments to Americans, an expansion of unemployment insurance, and $350 billion in aid to small businesses. The bill is currently being drafted and will be voted on later today. Lawmakers and optimistic that the bill will substantially aid those affected by the outbreak, with Senate Minority Leader Chuck Schumer saying "to all Americans I say: help is on the way, big help and quick help." Last week, the Fed's balance sheet grew to a new record with their latest purchases on Treasury security and increased repo financing. The S&P 500 rose 9.4% on the day yesterday- the largest single day gain since 2008. US Treasury yields rose across the curve with the 10-year rising 6 basis points to close at 0.85% yesterday - trading mostly sideways this morning.

 

 

Economic output has slowed globally. The US and Europe have documented record declines in business activity confirmed by IHS Markit data. The Purchasing Managers Index for the US, which measures the activity in the manufacturing and services sectors, dropped to a record low -- specifically highlighting a sharp deterioration in the services sector. The European index also fell to its lowest level. Chris Williamson, IHS Markit's chief business economist predicts "some absolutely horrific [gross domestic product] numbers coming through for the second quarter based on what these surveys are telling us for March."

 

 

Day ahead. US durable goods orders rose 1.2%, beating economist expectations. The White House will hold their daily coronavirus briefing this evening.

 

 

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