Global markets took a hit Thursday morning, setting up U.S. equities to open lower after the Fed warned of a weakening recovery and fading consumer confidence amid a record drop in GDP, and as Trump let loose the potential for an election delay as his administration suffers from its handling of the pandemic.
Driving the markets–and the Fed sentiment–was data showing a record 32.9% drop in GDP for the second quarter of 2020. Though a record, it was still lower than economists surveyed by Dow Jones, who were expecting a 34.7% plunge, CNBC noted.
Fed Chair Jerome Powell connected monetary policy directly to the COVID-19 pandemic, while the central bank, as expected, held interest rates steady near zero.
The Federal Open Market Committee (FOMC) said it remained committed to maintaining its bond purchases and its “full range of tools to support our economy in this challenging environment.”
“Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the Fed statement said. “Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”
For the first time in over three months, the yield on the benchmark 10-year Treasury note fell 3 basis points to around 0.54%, under the 0.55% threshold.
At the same time, Trump on Thursday brought up the idea of a delay to the November 3rd presidential election, alleging that mail-in voting would be fraudulent.
Trump tweeted Thursday: “With Universal Mail-In Voting (not Absentee Voting, which is good), 2020 will be the most INACCURATE & FRAUDULENT Election in history. It will be a great embarrassment to the USA. Delay the Election until people can properly, securely and safely vote???”
Trump is presently behind in the polls–a situation that led him in an interview with Fox News recently to refuse to commit to accepting election results in November.
Only Congress can change the date for a general election for president.
The Dow shed over 300 points Thursday morning on the combined news.
Not only was GDP the worst on record, but weakening consumer confidence painted a picture of an even longer recession.
Furthermore, weekly new jobless claims saw their second consecutive week of increases after dropping for four months in a row prior to that. Jobless claims hit 1.43 for the week ended Saturday, according to Labor Market data. That’s an addition of 12,000 new claims, which also came in slightly lower than anticipated.
The news comes as the giant tech stocks prepare to release their Q2 earnings after the market closes today. Apple, Amazon, Alphabet and Facebook were all trading lower before the market opening Thursday, as sentiment hedges on what their growth pictures look like in a pandemic.