Fed Expands Lending Programs – April 2020 Edition

The coronavirus continued to be the focus for investors this week. The biggest economic news was Thursday’s release of the details of the Fed’s plans to provide additional assistance to businesses and local governments. The stock market posted some welcome gains, with the Dow index adding over 2,500 points. For mortgage markets, daily volatility was significantly lower, and the net change in rates was relatively small.

On Thursday, the Fed announced a series of new actions to make available another $2.3 trillion of financing to businesses and local governments. The first massive $2 trillion fiscal stimulus relief package mostly targeted individuals and small businesses. This latest round of measures expands the amount of aid available to midsize companies and municipalities. In his press conference following the announcement, Chair Powell said that the Fed will act “forcefully, proactively, and aggressively” to do everything it can to “provide as much relief and stability” as possible during the crisis.

Thursday’s report on Consumer Sentiment showed a record one-month decline from 89 to 71, which was a little lower than expected and the weakest level since 2011. The sentiment index, which is based on a survey of consumers about their outlook for future economic conditions, noted greatly increased concerns about job security and income in coming months.

Filings for new Jobless Claims dropped from 6.9 million last week to 6.6 million this week, above the consensus forecast of 5.0 million. Typical readings before the outbreak were around 250,000. The US has lost 16 million workers, more than 10% of its workforce, over the past three weeks.

Looking ahead, the coronavirus will remain the main focus. Investors will be watching for news about additional Fed actions or government fiscal stimulus programs. Retail Sales will be released on Wednesday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data will provide another key indication of the negative impact of the outbreak. Housing Starts will come out on Thursday. Mortgage markets will be closed tomorrow in observance of Good Friday.

Weekly Change
10yr Treasury rose 0.10
Dow rose 2,700
NASDAQ rose 800
Wed 4/15 Retail Sales
Wed 4/15 Industrial Prod.
Thu 4/16 Housing Starts

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