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Fed Slashes Fed Funds Rate

by Archer Financial Services | Mar 16, 2020

By Alan Bush | Senior Financial Economist at ADMIS   

 

STOCK INDEX FUTURES

U.S. stock index futures were limit down in the overnight trade after the CDC indicated the likely time for the cases of the coronavirus to peak may take longer than previously hoped.

Stocks markets globally fell even after the Federal Reserve slashed its benchmark interest rate to close to zero, as investors remained concerned that the emergency measures may not be sufficient to ward off a recession, as a result of the coronavirus pandemic. The Fed also said it would buy at least $500 billion of Treasuries and $200 billion of mortgage-backed securities over the coming months, starting today.

Also, the International Money Fund said it has $1 trillion in loan capacity ready to put to work to alleviate the economic damage caused by the outbreak.

The March U.S. Empire Federal Reserve index was -21.5 when +4.9 was expected.

While traders focus on the negative bearish influence of the coronavirus, and rightly so, it will be the bullish impact of substantially easier credit from the world’s central banks that will dominate in the long term.
 

CURRENCY FUTURES

The U.S. dollar index is lower after the Federal Reserve slashed interest rates.

The flight to quality Japanese yen is sharply higher.  The Bank of Japan said it would double its stock purchases and help companies to obtain loans in response to the coronavirus pandemic.

The Japanese central bank has been purchasing exchange-traded stock funds at an annual pace of about $56 billion, and it said today it would double that target for now. It also introduced a new program to help banks lend to companies hit by the virus and expanded purchases of commercial paper. 

 

The Canadian dollar the Australian dollar are lower in response to sharply lower crude oil prices. 

 

INTEREST RATE MARKET FUTURES

Futures were sharply higher in a flight to quality move. However, prices are well off of the highs of the day as stock index futures stage a partial recovery.

GOLD

Gold prices are sharply lower as investors are selling the precious metal in order to meet margin calls and boost cash holdings. Lower interest rates usually lift the price of gold, which is clearly not the case today, as the desire to raise cash dominates.

 

SUPPORT AND RESISTANCE

June 20 S&P 500

Support    2350.00      Resistance    2650.00

June 20 U.S. Dollar Index

Support    97.530        Resistance    98.720

June 20 Euro Currency

Support    1.11200      Resistance    1.12830

June 20 Japanese Yen

Support    .93380        Resistance    .95600

June 20 Canadian Dollar

Support    .71520        Resistance    .72900

June 20 Australian Dollar

Support    .6072          Resistance    .6282

June 20 Thirty Year Treasury Bonds

Support    178^12      Resistance     182^26

April 20 Gold

Support    1450.0       Resistance     1582.0

May 20 Crude Oil

Support    28.40          Resistance     33.85

May 20 Copper

Support    2.3300       Resistance     2.5200



For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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