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Rabu, 04 Maret 2020

How you can profit from the record low 10-year Treasury yield - CNBC

For everyday Americans, there's some good news to the coronavirus fears that are driving investors to safe-haven investments likeTreasurys.

The yield on the benchmark 10-year Treasury note, which moves inversely to price, sank more than 11 basis points to an all-time low of 0.906% on Tuesday in the wake of an emergency rate cut by the Federal Reserve to combat the economic effects of the COVID-19 outbreak.

It was the first time the 10-year Treasury yield ever broke below 1%.

The yield on the 10-year note is a barometer for mortgage rates and other types of loans.

Most Americans' largest liability is their home mortgage. Currently, the average 30-year fixed-rate is about 3.71%, near the lowest level in years, according to Bankrate.com.

"Whether you are house shopping or refinancing, the rates today are a big advantage," Tendayi Kapfidze, the chief economist at LendingTree, an online loan marketplace, said Tuesday.

"For people refinancing, this will be a more compelling proposition," added Mark Hamrick, Bankrate.com's senior economic analyst. "You could be freeing up some money in your monthly budget and that money can be put to use."

There is also a correlation between Treasury yields and student loans.

A college education is now the second-largest expense an individual is likely to face in a lifetime — right after purchasing a home. To cover that cost, more than half of families borrow.

The rate on undergraduate Stafford loans is currently 4.5% for the 2019-2020 academic year but all federal education loans issued for 2020-2021 will be subject to new rates.

The government sets the annual rates on those loans once a year, based on the 10-year Treasury note.

If the 10-year yield stays near 1%, federal student loan interest rates could drop significantly when they reset in the spring, saving student borrowers hundreds of dollars in interest.

Other types of borrowing, including credit cards, small business loans and home equity lines of credit, are predominantly pegged to the federal funds rate and rise or fall in step with Federal Reserve's rate moves.

After Tuesday's surprise rate cut, those borrowing costs will become cheaper as well.

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2020-03-04 15:05:00Z
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Economists might not say it out loud, but recession risks are above 50%, Zandi says - MarketWatch

The numbers: Private-sector employment slowed a bit in February, according to an estimate from ADP and Moody’s Analytics released Wednesday. The private sector added 183,000 in February, down slightly from 209,000 in the prior month. The February gain was higher than the 165,000 job gain expected by economists surveyed by Econoday.

What happened: Large businesses did well in February, adding 133,000 jobs. Small businesses added 24,000 jobs and medium-sized businesses added 26,000.

According to data on 10 major industries tracked by ADP, education and health care had strong job gains, along with leisure and hospitality.

Big picture: It is still too soon to see any impact of the coronavirus impact on the data.

Economists expect a 170,000 rise in nonfarm payrolls in February, down from 225,000 in the prior month, according to a MarketWatch survey. The unemployment rate is expected to tick down to 3.5%.

Economists have become wary of using the ADP data to predict the government’s employment data because there have been large deviations recently. For instance, the January ADP report showed that 291,000 jobs were added in the private sector, while the Labor Department showed 206,000.

What ADP said? Mark Zandi, chief economist of Moody’s Analytics, said the slowdown in jobs in February was caused by the trade war with China. He said the ADP estimate was boosted by warm weather.

“We’re going to get much weaker job numbers going forward,” Zandi said, as there will be a payback for the warm weather gains. “Even without the virus, we were going to get weak numbers and now with the virus, we’re going to get much weaker numbers. It is just a matter of time,” he said.

“Economists have a really hard time saying over 50% probability of recession. I assure you, almost every economist out there is thinking over 50% probability,” Zandi said.

Market reaction: U.S. equity benchmarks were higher on Wednesday after the strong showing in the Super Tuesday Democratic primary contests by former Vice President Joe Biden. The Dow Jones Industrial Average DJIA, +2.08% was up 520 points to 26,440.

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2020-03-04 14:47:00Z
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Dow jumps as investors weigh Biden resurgence, efforts to guard economies against coronavirus - USA TODAY

Jessica Menton USA TODAY

Published 10:02 AM EST Mar 4, 2020

U.S. stocks rose Wednesday as investors weighed a big night for former Vice President Joe Biden in the Democratic primaries and the economic impact of the coronavirus outbreak.

The Dow Jones industrial average rallied 450 points. The Standard & Poor’s 500 climbed 1.3%, led by gains in health care shares. The Nasdaq Composite rose 1%.

Biden capped a strong Super Tuesday by winning Texas, the third-largest overall prize in the Democratic primaries, and at least eight other states. Bernie Sanders, a strong critic of Wall Street, won the biggest prize of Tuesday's primaries with a victory in California.

"The market's reaction Wednesday shows that investors have a clear preference for Joe Biden over Bernie Sanders," says Michael Sheldon, chief investment officer and executive director at investment advisor RDM Financial Group at Hightower.

Coronavirus: Fed cuts rates sharply in response to coronavirus risk to economy

Can the Fed save your 401(k) from the coronavirus?: It doesn't look like it.

Many investors fear a Sanders's nomination as the Democratic presidential candidate because his economic proposals are not viewed as business friendly. The strong showing from Biden on Tuesday and in primaries ahead could reduce those fears.

"The main reason investors prefer Biden is that he's a more established candidate and investors know what they're going to get since he was in the Obama administration," Sheldon says. "Sanders would bring with him a lot of potential unknowns including his plan for Medicare for All and his restrictions in areas like health care, energy and financials, which could have wide-reaching impacts on a range of different industries."

The gains came following a day of wild swings Tuesday after a surprise decision by the Federal Reserve to cut interest rates by half a percentage point. The move was aimed at defusing fears the coronavirus outbreak might stunt global economic activity.

China, Australia and other central banks also have cut rates to shore up economic growth in the face of anti-virus controls that are disrupting trade and manufacturing. But economists warn that while cheaper credit might encourage consumers, rate cuts cannot reopen factories that have closed due to quarantines or lack of raw materials.

The U.S. rate cut was the Fed’s first outside a regularly scheduled meeting since the 2008 global crisis. That prompted some traders to think the Fed might foresee an even bigger economic impact than markets fear.

“If the coronavirus has taught us anything, it’s that markets can be impacted by unexpected factors quickly and dramatically and that it’s important for investors to be prepared,” Randy Swan, chief executive and lead portfolio manager at Swan Global Investments, said in a note.

On Tuesday, the Dow Jones industrial average dropped nearly 800 points while the 10-year Treasury yield dipped below 1% for the first time. The yield on the 10-year Treasury was at 0.95% early Wednesday.

U.S. markets have fallen 11% since setting a record two weeks ago.

Global stock markets were mixed Wednesday. London opened lower while Germany advanced. Shanghai gained, Sydney and Hong Kong declined and Tokyo was little-changed.

The Associated Press contributed to this article.

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2020-03-04 14:44:39Z
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Dow futures jump as investors weigh Biden resurgence, efforts to guard economies against coronavirus - USA TODAY

Jessica Menton USA TODAY

Published 9:13 AM EST Mar 4, 2020

U.S. stock futures rose Wednesday as investors weighed a big night for former Vice President Joe Biden in the Democratic primaries and the economic impact of the coronavirus outbreak.

Dow futures rallied 700 points while Standard & Poor’s 500 futures climbed 2.4%.

Coronavirus: Fed cuts rates sharply in response to coronavirus risk to economy

Can the Fed save your 401(k) from the coronavirus?: It doesn't look like it.

U.S. markets have fallen 11% since setting a record two weeks ago.

Global stock markets were mixed Wednesday. London opened lower while Germany advanced. Shanghai gained, Sydney and Hong Kong declined and Tokyo was little-changed.

The Associated Press contributed to this article.

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Here’s how billionaire investor Howard Marks is telling clients to ride out coronavirus volatility - MarketWatch

After the Federal Reserve’s damned-if-they-did, damned-if-they-didn’t interest rate cut, it seems Democratic presidential candidate Joe Biden is getting some credit for what looks like a stock rebound on Wednesday.

The former Vice President’s comeback-kid performance in the Super Tuesday Democratic primaries has put him in a good position against Vermont Sen. Bernie Sanders in the race to take on President Donald Trump in November. But given the likelihood of a Democrat hiking taxes on big earners, Biden doesn’t exactly check all the boxes for a Wall Street hero, say some.

“The reason for the squeeze higher is most likely that it is a squeeze, the job now has turned to squeezing pockets of buyers and sellers in what is become a rangy and very volatile market,” Nordea’s senior macro strategist Sébastien Galy told clients. Others are, well, skeptical too.

It is a welcome respite from coronavirus angst at least, though that will undoubtedly return. That brings us to our call of the day from billionaire investor and co-chairman of Oaktree Capital Management, Howard Marks. In reference to these market ups and downs, he said “no one can tell you this is the time to buy” stocks because “nobody knows.”

He thinks “some buying” right now isn’t a bad idea ”because things are cheaper. But there is no logical argument for spending all your cash, given that we have no idea how negative future events will be,” Marks said in a memo. “What I would do is figure out how much you’ll want to have invested by the time the bottom is reached — whenever that is — and spend part of it today.”

He said if stocks move up, then investors will be happy they picked up some, or if they keep falling, investors will have some money left and maybe the nerve to buy more. What’s key is accepting that the future is a bit uncertain right now.

Marks noted that major “stress events” of the last 25 years — Asian Contagion of 1997, the 2008-09 financial crisis, etc. — were all “gut-wrenching,” but “followed by recoveries that produced significant gains for stalwart investors.”

While a guess, the manager tried to cheer up worried clients by saying that ultimately, the coronavirus seems “unlikely to fundamentally and permanently change life as we know it.”

The market

Dow DJIA, -2.94%, S&P SPX, -2.81% and Nasdaq COMP, -2.99% futures are surging, taking European stocks SXXP, +1.66% along for the ride, while Asian markets ticked mostly higher. China’s services purchasing manager data was horrendous. The yield TMUBMUSD10Y, +1.11% on the 10-year government bond is under 1%.

The chart

The coronavirus crisis isn’t hurting coffee futures, which are having their best week in years thanks to rainy Brazil. Here’s that chart from The Daily Shot.

And farmers are also pretty upbeat these days:

The tweet

Toilet-paper economics thread:

The buzz

JPMorgan Chase JPM, -3.75% has reportedly asked thousands of employees to test out working from home as companies gear up for coronavirus contingency planning. Meanwhile, an Amazon AMZN, -2.30% worker in Seattle has tested positive for the coronavirus. A bipartisan deal to provide $7.5 billion in emergency U.S. funds against the virus is getting close.

Hewlett Packard Enterprise HPE, -2.33% shares are dropping after the technology giant’s revenue disappointed and it warned of no revenue growth in fiscal year 2020, partly due to the coronavirus.

Ahead of Friday’s jobs data, the ADP private-sector payrolls report is coming, followed by the Markit services purchasing managers index, the Institute for Supply Management’s nonmanufacturing index and the Fed’s beige book of economic conditions.

Random reads

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2020-03-04 11:39:00Z
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Weekly mortgage refinances spike 26% as interest rates tank on coronavirus fears - CNBC

A sharp drop in mortgage interest rates had borrowers rushing to their lenders last week.

Refinance volume spiked, sending total mortgage application volume up 15.1% for the week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.57% from 3.73%, with points decreasing to 0.26 from 0.27 (including the origination fee) for loans with a 20% down payment. Rates are even lower now. One year ago, the average rate was 4.67%, 110 basis points higher.

That drop caused a 26% surge in weekly refinance applications. Compared with one year ago, refinance volume was nearly 224% higher. An MBA spokesman said they will be updating their annual forecast later this week, calling for a big uptick in refinances.

"The 30-year fixed rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility," said Mike Fratantoni, MBA's senior vice president and chief economist. "Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize."

Detroit-based Quicken Loans saw record-setting volume on Monday and Tuesday, as rates fell to a record low. CEO Jay Farner said the new ways of processing loans are making it easier to handle even tremendous volume spikes.

"The way that we leverage technology to communicate with our clients, to make it easy for them to make a mortgage application, for our underwriters, we can scale very quickly, which helps us when we see increased volume like this," said Farner. "As application volumes increase, our turn times are remaining steady. We can scale with our clients and still can expect to make application and close a mortgage within a few weeks and not have to wait months and months as volumes increase."

Mortgage applications to purchase a home fell for the week, down 3%, but were 10% higher than a year ago. The drop in rates, though good for buyers, is due to wild market volatility and concern about how the coronavirus will affect the economy. That may be causing some buyers to pull back on what is, for most Americans, their single largest investment.

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2020-03-04 12:00:00Z
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Stocks rise after Biden win and coronavirus rate cut - Yahoo Finance

Democratic presidential candidate Joe Biden speaks during a primary election night rally. (Marcio Jose Sanchez/AP)

European stocks climbed on Wednesday as investors continued to assess the impact of Tuesday’s emergency rate cut from the Federal Reserve and former US vice-president Joe Biden’s victories in the Democratic primary.

After a volatile trading session, US stocks closed deep in the red on Tuesday, as markets became anxious about the meaning of the Fed’s unexpected decision — the largest since the financial crisis — in the context of the continued coronavirus outbreak.

“There is some serious trouble brewing, and traders are not aware of what is to come. This is the message that investors took away from the Federal Reserve’s surprise action yesterday,” said Naeem Aslam, the chief market analyst at Avatrade.

There have now been more than 93,000 cases of coronavirus globally, with the numbers growing rapidly in Europe.

The pan-European STOXX 600 index (^STOXX) was up by around 1% on Wednesday morning.

The FTSE 100 (^FTSE) climbed by 1.3% in London. Germany’s DAX (^GDAXI) was up by 0.8%, while France’s CAC 40 (^FCHI) was up by around 1%.

Futures are pointing to a higher open for US stocks, which are likely to be buoyed by Biden’s slew of victories.

“Joe Biden’s Super Tuesday wins left him in a much stronger position. Bernie Sanders took the big prize of California, but the resurgence for the moderate Biden helped lift market sentiment, sending futures higher,” said Neil Wilson, the chief markets analyst at Markets.com.

S&P 500 futures (ES=F), Dow Jones Industrial Average futures (YM=F) and Nasdaq futures (NQ=F) are all up by around 2%.

The boost to European equities and US futures followed a mixed trading session in Asia.

Two closely watched purchasing managers' indices from Hong Kong and China fell to all-time lows in February, a sign that the country has plunged into deep recession.

China’s SSE Composite Index (^SSEC) climbed by 0.6%, while the Hang Seng (^HSI) was down by around 0.2% in Hong Kong at market close.

Japan’s Nikkei (^N225) closed flat, while the KOSPI Composite Index (^KOSPI) in South Korea, where there have been more than 5,300 cases of coronavirus, closed around 2.2% in the green.

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2020-03-04 09:00:00Z
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