Plus, Congress and the Trump Administration are nearing a coronavirus aid package, and the Fed began buying Treasurys.
Stocks rallied to start Friday with the Dow gaining 800 points, or 3.7%. The S&P 500 surged 4.2%, while the Nasdaq traded 4.1% higher.
Stocks bounced back after their worst day since the “Black Monday” market crash in 1987. Prior to open, S&P 500 futures hit their “limit up” levels, gaining more than 5% as policy makers around the world began taking action to stave off the economic fallout from the coronavirus. After days of no or inadequate action, policy action was delivered today as the European Union said it would suspend government spending rules, regulators in Italy and Spain banned short-selling on some stocks, Germany pledged to spend all the money needed to support the economy amid the outbreak, and as China’s central bank said it would pump in $79 billion to bolster the economy. “It’s possible we’re just recovering a portion of yesterday’s losses on the idea that there were no terrible headlines this morning,” said Susquehanna Financial Group strategist Christopher Jacobsen. “The market had priced in the extreme dour outcome and the lack of news flow this morning to confirm that worst-case scenario resulted in just a bit of a relief rally.”
House Speaker Nancy Pelosi said she and the Trump Administration are nearing a deal on a coronavirus aid package that would include pay for sick days, free testing, and other resources. Treasury Secretary Steven Mnuchin said, “We’re very close to getting this done,” adding that the government will use whatever tools are needed to help industries weather the crisis. “The president is absolutely committed that this will be an entire government effort, that we will be working with the House and Senate,” Mnuchin added. While President Trump has put pressure on Congress to include a nine-month payroll tax holiday in its coronavirus relief package, the bill that Pelosi and Mnuchin are finalizing does not include the suspension.
The New York Federal Reserve will begin buying Treasurys across the yield spectrum today as part of its efforts to help the financial system through the coronavirus scare. “These purchase are intended to address highly unusual disruptions in the market for Treasury securities associated with the coronavirus outbreak,” the New York Fed said in a statement. The moves are part of $60 billion in purchases already announced as part of the Fed’s efforts to expand its balance sheet and reserves in the banking system. The Fed will also be reinvesting $20 billion of principal payments it receives from holdings in agency debt and mortgage-backed securities. When it meets next week, Wall Street is increasingly expecting the Fed will take interest rates to zero with both Goldman Sachs and Bank of America joining the call for a 100 basis point cut. “In light of the continued growth in coronavirus cases in the US and globally, the sharp further tightening in financial conditions, and rising risks to the economic outlook, we now expect the FOMC to cut the funds rate 100bp on March 18, a faster return to the crisis-era 0.25% rate than under our previous call for two 50bp steps in March and April,” Goldman economists wrote in a note.
Speaking of the coronavirus, global cases have risen to at least 135,000 with global deaths at at lest 4,977. In the U.S., there are at least 1,701 cases of the virus, and at least 40 deaths. The Trump administration has announced new steps to speed up testing for COVID-19 after widespread warnings about a bottleneck in diagnosing cases that’s preventing a clearer snapshot of the pandemic’s spread in the U.S. “Testing will soon happen on a very large scale basis,” Trump tweeted this morning. “All Red Tape has been cut, ready to go!” While National Institute for Allergy and Infectious Diseases director Anthony Fauci said yesterday that widespread testing in the U.S. was so far “failing,” Fauci told MSNBC this morning that, “Within a week we’re going to start seeing a real acceleration of testing. I think we are going to see a much different situation than we saw just a few weeks ago.”
Roche shares are up 3% this morning after news broke that the U.S. Food and Drug Administration had issued emergency authorization for the company’s COVID-19 test. Roche’s test will speed up the ability to test patients tenfold, helping solve a significant obstacle to efforts to continue the virus in the U.S. Roche’s new test works in its high-volume cobas 6800/8800 systems, widely used diagnostic machines that will be able to process between 1,440 to 4,128 patients per day. There are already about 110 of these systems in the U.S., with more being placed in recent weeks. Millions of units of the Roche test will be available for the hospital and commercial labs that use the system. “Over the last weeks, our emergency response teams have been working hard to bring this test to the patients,” said the chief of Roche Diagnostics, Thomas Schinecker, in the company’s announcement. “We are increasing the speed definitely by a factor of 10,” Schinecker added in an interview.
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Inovio Pharmaceuticals (NASDAQ: INO): Inovio shares jumped 42.5% yesterday after the biotech said it had received a $5 million grant from the Bill and Melinda Gets Foundation to accelerate the testing of a proprietary smart device for intradeermal delivery of a vaccine to treat the coronavirus. Inovio’s INO-4800 vaccine is now in preclinical studies and the company hopes to advance to human clinical trials in April. While its Cellectra 3PSP device—a small, hand-held portable device that runs on AA batteries—is being developed to inject the vaccine. Inovio is working to “scale up both INO-4800 and CELLECTRA 3PSP devices to potentially make available millions of doses to combat this outbreak,” and hopes to deliver one million doses of INO-4800 by year-end.