U.S. Stock Futures Jump After Dipping to Brink of Bear Market

(Bloomberg) -- U.S. stock futures erased losses after President Donald Trump promised “very substantial relief” for the economy as the coronavirus spreads.Contracts on the S&P 500 gained 1.5% as of 8:17 a.m. in Tokyo, erasing earlier losses as Trump said he’s considering payroll-tax cuts. The White House virus task force is holding a press conference in Washington.Futures had dropped as much as 1.9%, bringing the plunge since a February record past almost 20%. Dow Jones Industrial Average contracts also briefly fell more than 20% from the all-time high.“We certainly expect an economic slowdown but so much of where the global economy goes will be dictated by policy responses,” Kristina Hooper, Invesco’s chief global market strategist, said in an interview at Bloomberg’s New York headquarters. “Arguably, more importantly, is the fiscal policy response. It’s absolutely critical. That’s going to be more important than the monetary policy response.”The underlying S&P 500 Index tumbled 7.6% during Monday’s cash session after an oil price war broke out in markets already rattled by the spreading coronavirus.Investors fled risk assets with virus cases surging and the Trump administration so far unwilling to step in to soften the expected economic blow. The U.S. announced more deaths, Italy struggled to lock down its financial hub and the World Health Organization warned the threat of a pandemic is “very real.” The velocity of the drawdown in American equities is threatening to end the bull market that just logged its 11th anniversary.Added to the uncertain impact of the virus on the economy is the crashing oil price that threatens to upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home. Investors are clamoring for some policy response from the Trump administration, which has so far signaled that it believes the spread is under control.The market meltdown is forcing equity investors to confront worst-case scenarios they normally delegate to colleagues in credit: which companies can survive a slowdown, and which are teetering toward extinction?The urgency of the assessment is a sign stock managers have entered survival mode as credit spreads spike. Companies with strong balance sheets have generated “extraordinary returns” on a relative basis since the S&P 500 peaked on Feb. 19, according to Goldman Sachs Group Inc.’s chief U.S. equity strategist, David Kostin. Their weaker counterparts have gotten trounced.\--With assistance from Vildana Hajric.To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.netTo contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.netFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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