BLOG EDITOR: THE PURPOSE OF THE FED RESERVE IS TO PUMP SOCIALISM INTO WALL STREET AT THE COST OF MIDDLE AMERICA. IT'S PART OF THE TRICKLE UP ECONOMIC POLICIES THAT HAVE TRANSFERRED THE NATION'S ECONOMY TO THE RICH FOR DECADES.
"Powell offered guarantees to the markets that the flood of additional cheap money—totaling more than $3 trillion over the past three months—would continue and interest rates would remain at virtually zero for an indefinite period."
Biggest fall on Wall Street since March meltdown
12 June 2020
Wall Street has been hit by its biggest plunge since mid-March when financial markets froze and the Federal Reserve stepped in with a major intervention to backstop them.
The S&P 500 dropped by 5.9 percent, its worst day since March 16, after it had risen by 45 percent and returned to its highs at the start of the year as a result of the three-month boom in stocks that followed the Fed’s intervention.
The Dow dropped by more than 1,800 points, a decline of 7 percent, and the tech-heavy Nasdaq index, which had reached a record high earlier in the week, fell by 5.3 percent.
Trader Michael Gallucci on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)
The Cboe Volatility Index, often referred to as Wall Street’s “fear gauge,” rose 48 percent to reach 41, its biggest one-day jump since the market turmoil in March.
Yesterday’s sharp falls on Wall Street followed significant declines in Europe. The regional Stoxx 600 index dropped by 4.1 percent and the UK’s FTSE 100 index closed down by 4 percent.
The main reason for the sharp fall was the gloomy outlook for the US economy contained in the report on economic prospects set out by the Fed on Wednesday. It said the US economy would contract by 6.5 percent over the year and end 2020 with an unemployment rate of 9.3 percent.
Fed chairman Jerome Powell warned it would take years for the economy to recover and there was a group of people who would not be able to get back to work quickly that could total millions.
Powell offered guarantees to the markets that the flood of additional cheap money—totalling more than $3 trillion over the past three months—would continue and interest rates would remain at virtually zero for an indefinite period.
But it appears from the market reaction
yesterday that even these guarantees are not
enough in the face of a worsening economic
outlook for the US and global economy and
Wall Street is demanding more.
yesterday that even these guarantees are not
enough in the face of a worsening economic
outlook for the US and global economy and
Wall Street is demanding more.
Like a modern-day King Canute, US President Trump intervened on Twitter as the market was falling to denounce the economic outlook advanced by the Fed.
“The Federal Reserve is wrong so often,” he wrote. “I see the numbers also, and do MUCH better than they do. We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever year in 2021.”
The market fall came in the wake of a report that a further 1.54 million initial claims for unemployment relief had been filed in the week ending June 6, bringing the total of first-time claims to 44.2 million since the start of the pandemic.
The number of COVID-19 cases in the US has topped the 2 million mark with the death toll now at more than 112, 000 and climbing by 1000 per day, amid a surge in states in the southwest that eased lockdowns weeks ago.
But the Trump administration has made it
clear the homicidal return to work drive,
directed to boosting the profits of Wall Street,
will continue no matter what the
consequences.
clear the homicidal return to work drive,
directed to boosting the profits of Wall Street,
will continue no matter what the
consequences.
“We can’t shut down the economy again,” Treasury secretary Steven Mnuchin told the business channel CNBC. “I think we’ve learned that if you shut down the economy, you’re going to create more damage.”
Mnuchin followed Trump in dismissing warnings that unemployment would be close to 10 percent at the end of the year. He claimed the economy would rebound in the second half and said traditional economic models were poorly equipped to predict the effects of a pandemic. These remarks recall those of Trump at the end of February when he said of the coronavirus that “one day, it’s like a miracle, it will disappear.”
In addition to the clear warnings by the Fed and other forecasters that there is not going to be V-shaped economic recovery in the US, the rapid downturn in the global economy is also a major factor in Wall Street volatility.
Boosted by the Fed’s support for all areas of financial markets the S&P 500 roared ahead even though, according to some estimates, more than one in three companies comprising the index have not provided earnings guidance.
But with 40 percent of the revenue of S&P 500 companies coming from overseas sales, US financial markets are not immune from developments in the world economy. Here all indicators are pointing to a deepening slump.
Yesterday the United Nations Conference on Trade and Development (UNCTAD) said global trade was expected to plunge by 27 percent in the second quarter compared with the same period last year. In April alone, UNCTAD said, preliminary data showed trade in energy products had dropped by 40 percent with automotive products plunging by 50 percent.
For the whole year it predicted that global trade would fall by 20 percent compared with 2019.
One of the direst warnings of the global effects of the pandemic was issued earlier this week by the Organisation for Economic Cooperation and Development (OECD).
OECD chief economist Laurence Boone said the impact of the coronavirus on unemployment, corporate bankruptcies and the effects of social distancing would be large and would prevent a normal recovery from a recession.
“Most people see as V-shaped recovery, but we think it’s going to stop half way,” she said.
According to the OECD forecast: “By the end of 2021, the loss of income exceeds that of any previous recession outside wartime, with dire and long-lasting consequences for people firms and governments.”
If a second wave were avoided, the global economy would contract by 12 percent in the first half of 2020 and by the end of 2021 it would still be below the level reached at the start of this year. But if a second wave of the virus struck in the northern winter global output would be reduced by a further 10 percent next year.
Donald Trump attacks the Federal Reserve again after stocks plunge following its warning the economy is not recovering and faces years more pain
- Trump tweeted the Fed 'is wrong so often'
- He also predicted a vaccine and cure for coronavirus 'soon'
- Another 1.5 million laid-off workers applied for unemployment benefits last week, the Labor Department said on Thursday
- It means nearly 44 million Americans have been thrown out of work in the three months since COVID-19 struck hard in March
- The latest figure marked the 10th straight weekly decline in applications for jobless aid since they peaked in mid-March
- While the layoffs may be declining, millions who lost their jobs because of COVID-19 continue to apply for ongoing unemployment benefits
- The number of people staying on benefits remains high with the so-called continuing claims at 20.9 million
- Federal Reserve Chair Jerome Powell said it could take years for the millions who are now unemployed to regain jobs
- US stocks plunged following Powell's remarks with the Dow dropping 1,000 points in midday trading on Thursday
- Here’s how to help people impacted by Covid-19
President Donald Trump went back to attacking the Federal Reserve Thursday, hitting at the central bank after a steep market decline.
Trump did not go after Fed chairman Jerome Powell, something he has not been shy about doing in the past. But he did say the Fed 'is wrong so often,' in a critique that came hours after Powell gave stark warnings about what may be in store for the future of the U.S. economy as it contends with the coronavirus.
'The Federal Reserve is wrong so often. I see the numbers also, and do MUCH better than they do,' Trump tweeted about 11 am Thursday.
'The Federal Reserve is wrong so often,' President Trump tweeted Thursday
'We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021. We will also soon have a Vaccine & Therapeutics/Cure. That’s my opinion. WATCH!' he wrote.
Trump was returning to form by going after the Fed, which he battered last year for maintaining interest rates Trump considered too high.
In March, Trump said Powell 'really stepped up' as the Fed started shoving out trillions to shore up the nation's economy as the coronavirus pandemic hit.
The fate of Trump's reelection could be wrapped up in whether the nation can maintain a positive economic trajectory and whether there is an easing of the huge jumps in unemployment of U.S. workers.
Trump hit at the Fed as the stock market took another dive on Thursday
His tweet came after another 1.5 million Americans applied for jobless benefits last week despite business reopening after COVID-19 lockdowns - and as the Dow plunged 1,000 points following the Fed's dire warning that it could take years to get lost jobs back.
The latest figure from the Labor Department on Thursday marked the 10th straight weekly decline in applications for jobless aid since they peaked in mid-March when the coronavirus hit hard.
Still, the pace of layoffs remains historically high.
It means nearly 44 million Americans have been thrown out of work in the three months since COVID-19 struck hard in March, forced widespread business closures and sent the economy into a deep recession.
It is evidence that many Americans are still losing their jobs even as the economy appears to be slowly recovering with more businesses partially reopening from COVID-19 lockdowns.
Powell said it could take years for the millions who are now unemployed to regain jobs.
'My assumption is that there will be a significant chunk, well, well into the millions of people who don't get to go back to their old jobs and there may not be a job in that industry for them for some time,' he said.
'It could be some years before we get back to those people finding jobs.'
US stocks plunged following Powell's remarks with the Dow dropping 1,000 points in midday trading on Thursday.
Another 1.5 million laid-off workers applied for unemployment benefits last week. The latest figure from the Labor Department on Thursday marked the 10th straight weekly decline in applications for jobless aid since they peaked in mid-March with 6.87 million applications
Nearly 44 million Americans have been thrown out of work in the three months since COVID-19 struck hard in March, forced widespread business closures and sent the economy into a deep recession
According to the Labor Department report, the total number of people who are receiving unemployment aid fell slightly, a sign that some people who were laid off when restaurants, retail chains and small businesses suddenly shut down have been recalled to work.
New applications for state unemployment benefits fell to a seasonally adjusted 1.5 million for the week ended June 6, from 1.897 million the prior week, the Labor Department said on Thursday.
That pulled initial claims further away from the record 6.87 million in late March.
But the number of people staying on benefits remained high, with the so-called continued claims number at 20.9 million for the week ended May 30, the most recent data available for that metric.
This was still lower than 21.268 million in the prior week.
The states with the highest number of new claims for the week ending May 30 were in Florida, where applications were up 32,000; California, where applications rose by 25,000; and Oklahoma, which saw an increase of 16,000.
In Florida, the majority of layoffs were in the construction, manufacturing, wholesale trade, retail trade and service industries. Layoffs in California mostly occurred in the service industry.
New York saw the largest decline with new jobless aid claims down more than 107,000. There were fewer layoffs in the health care and social assistance, retail trade, and accommodation and food services industries, according to the report.
Michigan saw its applications drop more than 25,000, Pennsylvania was down 18,000 and Washington dropped 17,000.
The Dow plunged 1,000 points following the Federal Reserve's dire warning that it could take years to get jobs back that were lost during the COVID-19 pandemic
The total number of people who are receiving unemployment aid fell slightly, a sign that some people who were laid off when restaurants, retail chains and small businesses suddenly shut down have been recalled to work. Pictured above is a restaurant having reopened in Farmingdale, New York
The weekly jobless claims report, the most timely data on the economy's health, followed news last Friday of a surprise 2.5 million increase in nonfarm payrolls in May.
It reinforced views that the labor market has weathered the worst of the turbulence but claims for jobless benefits are still more than double their peak during the Great Recession.
Many businesses have reopened after being shuttered in mid-March to slow the spread of COVID-19. However, claims remain elevated amid jobs cuts outside the consumer sector, among industries that were not initially hit by the shutdown.
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