Market and Fed March 3, 2020

Volatility moves fast.  The 5.09% Dow increase yesterday was on 25.46% lower volume than last Friday and the Nasdaq volume was also significantly down at 19.34% yesterday.  The G7 made no fiscal stimulus commitments offering only words of appropriate policy action.

The Fed Repo Operations significantly spiked today with $108.608 billion 1 day term submitted and $100 billion accepted while $70.950 billion 14 day term was submitted with only $20 billion accepted.

The market started down a little over 200 points and started easing back basically on the G7 lack of fiscal stimulus action.  The European market were all up.

The the Fed makes an emergency rate cut of 50 basis points, which is what the market wanted and the market is still down and has gone down over 100 points as I write this at 9:19 AM Central time.

In my opinion the repo spike was the new driving data, but the Fed may find the 50 basis points too preemptive (and consequently less effective) and too much spent ammunition (25 basis points would not have satisfied the market but the that is not the Fed's job) to counter what could be a recessionary downturn as the global economic impact of the coronavirus infection multiplies and the infection grows in the United States.

Officially a recession takes two quarters of negative growth, which should be increasing apparent by the end of May going into June.  The first quarter is pretty obvious.  The Federal government needs to provide fiscal stimulus with direct effect on health care, employment, and support of economic sectors most heavily impacted by the coronavirus economic impact.  Additionally, the Federal government needs to start working with the international community to control and treat the coronavirus infection.  The United States is not in this alone.  If the U.S. does not start effectively cooperating and coordinating international response, including fiscal support, then the economic impact globally will be worse.

It begins.

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