Friday’s session on Wall Street ended with declines in major indices. Why? Investors, despite Joe Biden’s victory, fear the Fed’s credit programs will end.
Wall Street session ended with declines
Dow Jones Industrial ultimately fell 0.75 percent. and amounted to 29,263.48 points. S&P 500, in turn, by 0.68 percent. and amounted to 3,557.54 points. Nasdaq Comp. by 0.42% to 11,854.97 points
Investors are worried about further Fed policy and pandemic situations.
There is light in the tunnel on the latter, as if Pfizer’s application is approved by the FDA, the vaccine is likely to be put into use in several phases in the coming months. However, the FDA approval itself will take several more weeks.
“The fact that the market is able to cope with the negative news means that we have a slightly better time ahead. The increases are driven by the fact that economic activity will accelerate in the medium term due to the positive news about vaccines “
Said François Savary, investment director at Prime Partners.
In turn, US Treasury Secretary Steven Mnuchin announced on Thursday that the Federal Reserve’s most important loan programs related to the pandemic will expire on December 31. The Fed would now return $ 455 billion to the Treasury. The US Congress is then to allocate these funds to other purposes.
“I am asking the Federal Reserve to return unused funds to the Treasury”
Mnuchin wrote in an open letter to Fed chairman Jerome Powell.
However, the Fed believes that loan programs should “Continue to fulfill its important role” as a hedge for a weak US economy.
“I think given the economic situation and great uncertainty, it makes more sense to extend the operation of these programs”
Atlanta Fed chairman Raphael Bostic said in an interview with Bloomberg Television.
This means that the new president will encounter a considerable problem at the very beginning: whether to continue the current policy or to change it.
“For about three weeks in January (until Biden is sworn in as president – PAP)
markets will operate without the backstop they have had since spring “
– JPMorgan analyst Michael Feroli forecasts.
“We do not believe that the dispute that broke out between the US Treasury Department and the Federal Reserve has had a major impact on the financial markets. Certainly something like this is not good news, but the impending end of the term of the current administration probably means that the risk of real damage to the real economy is limited. “
– says the head of the research department of the MUFG Derek Halpenny.