Stock Market Outlook: In the Federal Reserve We Trust?

Brandon Van Zee

The S&P 500 Index plunged -2.81% today, with all of the selling occurring after the surprise 50 basis point interest rate cut from the Federal Reserve.

There were 10 stocks finishing lower today for each stock that finished higher.

All four major U.S. stock market indices continue to have strongly bearish postures after another day of above average price ranges.

All four of those stock indices also have bearish Market Sentiment postures, which represents the longest look-back periods of the Market Forecast.

It’s not surprising to learn that all four indices continue to also have “3 Red Arrows” signals in place.

One of the biggest stories of the day didn’t occur in the stock market, but rather, with surging bond prices after the interest rate cut decision.

The 10 year U.S. Treasury yield fell below 1% intraday for the first time in history (it closed at 1.01%).

The VIX Volatility Index spiked higher (closing near 37) and the flight to safety benefited gold, which finished higher by over 3%.

Stock Market Video – March 3, 2020

The U.S. Dollar fell again, hitting its lowest level in over a month.

All eleven sectors finished lower today, with plunging interest rates taking a knife to the Financials(-3.76%) but allowing Real Estate to break even (-0.08%).

Fixed income instruments of many stripes benefited from today’s movement, including: corporate bonds, foreign bonds, U.S. Treasuries, municipal bonds, and mortgage backed securities.

Our trade application example featured selling a put on Gilead Sciences (GILD); which has gone higher in the past month due to its association with the coronavirus and now has a bullish intermediate posture after breaking out of a year-long sideways base in recent weeks.

Twitter:  @BrandonVanZee and @Market_Scholars 

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.