US Sell off Continues as National Guard Brought In

By Eliman Dambell 

 

Sundays are becoming the day which sets the tone for all that is to follow in the world. Not just in markets through fiscal action, but in everyday life via political decisions. This tone has mainly been set by the US in recent weeks. Last week we saw the announcement from the Federal Reserve that interest rates were to be cut once more. Leaving the base rate at ZERO. This decision was followed by an announcement that the US would also be looking at adding a $1.2 trillion stimulus package to help ease the pressure markets and consumers are experiencing. That following week we saw several nations the world over announce similar moves, including the UK, where Rishi Sunak delivered a big stimulus package.

This weekend, the US announced that it will be sending in the National Guard to 28 states across the country, including New York State, which alone has over 15,000 cases of COVID-19. The move comes in a bid to enforce “social distancing” measures. This move saw huge sell offs in futures markets as we limit down orders actioned, which as a result halted trading. If the futures markets are anything to go by, we may see this week entering potentially the most volatile yet.

Impacted markets

NASDAQ Futures

This index, which comprises of US TECH stocks fell as much as 600 points in futures trading on the announcement. The drop, which happened shortly after the futures markets opened on Sunday evening, saw markets limit down, a term many have become familiar with in recent weeks, as bearish volume overwhelmed the exchange to the point of interim closure. To understand this further, it’s like entry into a train station is limited due to overcrowding, and as a result leading the staff to limiting the entry of new travellers up until the service has been regulated.

As seen on the chart below, this worked, after gapping down, and the limit down order was given, markets began to consolidate at a price of 6733. Now many are looking towards the US open to see if the consolidation will end, or will there be further bearish pressure applied as the measures the government are imposing destabilise the idea of “normal life”.

SP500 Futures

The Standards & Poor 500, better known as the S&P500 was another one of the markets under pressure. The move to bring in the National Guard and the “stay at home” advice means many consumer businesses have been forced to close their doors. As a result we see the levels to which markets have reacted in the below chart.

Another variable which impacts the price movement here is the US senate’s inability to agree to a deal on what the stimulus package should be. The lack of a firm commitment has meant, although markets have been told “help is coming”, the number in respect to reinforcements has not been agreed upon, meaning a stalemate for all those involved.

If the above is anything to go by, many may fear the same will happen in many regions around the globe, with Army boots on the ground, to help enforce curfew like means in a bid to lessen the spread of the virus.

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