Dow Jones Now Sees More Volatility Despite Fed Effort to Stabilize the Economy

The Dow Jones now is volatile after the U.S. Federal Reserve released the results of 119 bond issue purchases within two days as of June 17.

The central bank had scooped up huge chunks of debt from AT&T Corp. (NYSE: T), UnitedHealth Group Inc. (NYSE: UNH), Comcast Corp. (NASDAQ: CMCSA) and Walmart Inc. (NYSE: WMT). Other events moving the Dow today, below.

Here are the numbers from Friday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 25,015.55 -730.05 -2.84
S&P 500 3,009.05 -74.71 -2.42
Nasdaq 9,757.22 -259.78 -2.59

Now here are what I think will be the most important market events and stocks on Monday morning.

The Top Stock Market Stories for Monday

  • States from Florida to California are shutting bars and other businesses to stop the ongoing resurgence of COVID-19 cases. Over the weekend, Democrat leader Nancy Pelosi called on the CDC to set a mandate that would require all Americans to wear masks in public. Over the weekend, the seven-day average of new cases increased by 41% from the previous week, according to Johns Hopkins. At least 126,000 people have died from COVID-19 in the United States alone this year.

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  • The Federal Reserve's efforts to purchase corporate debt is its latest effort to stabilize the U.S. economy. The central bank purchased 119 bond issues in two days as of June 17. However, the Fed did not really discriminate on the quality of the bonds as 48.3% of the bonds purchased through the Fed's secondary credit facility had a rating of Triple-B or Junk Status.
  • While COVID-19 remains the biggest threat at the moment, it appears that many investors are failing to price in the possibility of two major political issues. First, as I've warned many times, the United States and China remain embroiled in a tense period over the outbreak of COVID-19 and the stability of their trade relationship. Meanwhile, markets are largely ignoring the likelihood that not only will Joe Biden likely win the 2020 presidential election, but Democrats are likely to secure the Senate. A sweep of the White House and both Chambers of Congress would give Democrats the ability to drive sweeping political reform, including the likely elimination of the Trump-era tax cuts.

Stocks to Watch Today: FB, KO, GPS, CHK

  • Shares of Facebook Inc. (NASDAQ: FB) are under pressure after the technology company faces renewed pressures from corporate America on social media platforms and the consideration of hate speech. Starbucks Corp. (NASDAQ: SBUX) said over the weekend that it will pause its advertising on all social media platforms and that it will meet with civil rights organizations and other partners to end the spread of hate speech. Coca Cola Co. (NYSE: KO) made a similar commitment last Friday.
  • Shares of Gap Inc. (NYSE: GPS) are one of the positive stocks this morning after the company announced a major fashion collaboration with Kanye West. The artist's Yeezy brand is developing clothing lines for men, women, and children. The partnership will see West's clothing line start selling in Gap stores and online in 2021. The news sent shares up more than 20% in the final hour of trading on Friday.
  • Chesapeake Energy Corp. (NYSE: CHK) shares are in a free fall again after the fracking giant filed for bankruptcy on Sunday afternoon. The company - once the second-largest producer of natural gas in the United States - was overwhelmed by corporate debt, and that was before the outbreak of COVID-19. Wildcatter Aubrey McClendon co-founded the company in 1989. The firm became one of the leading energy companies to embrace horizontal drilling and hydraulic fracturing to unlock natural gas reservoirs.

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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