By Denny Gulino
THE WHITE HOUSE (MaceNews) – Market optimism overruled medical pessimism for a Tuesday moment, with dreams of some kind of fiscal policy panacea pitted against nightmare scenarios prompted by worsening news about the corona virus and its anticipatory side effects.
Stocks roared with rebound buying accelerating into the close. The S&P 500’s 4.94% gain, in such graphic contrast to Monday’s 7.6% decline, was mostly accomplished in the last two hours of trading, a steady climb of more than 300 points to 2882.23.
Two and a half hours earlier, though, the day’s outcome had been in doubt, as the major stock indexes all went negative before noon. In subsequent ragged trading, the indices only gradually built a foundation for the final run. Still, the S&P finished down nearly 15% from its recent all-time high.
What were traders and investors watching? There were meetings on Capitol Hill and optimistic statements from President Trump like, “Be calm. It’s really working out.”
The “it” remained vague with some talking heads saying they were at least encouraged the president seemed persuaded of the need for government to do more.
Others, aware of what it takes to get House Democrats and Senate Republicans to fist-bump their way to agreement, thought Trump ultimately would have to declare a national emergency and not wait for Congress.
Analysts talked about all sorts of programs that Congress could authorize, like the ones President Trump had mentioned Monday night, paid leave to allow wage earners to stay at home while recovering, relief for the industries hardest hit like hotels, airlines and cruise lines and a payroll tax cut.
That last one was seen least likely on Capitol Hill with Republicans, like Senate Majority Leader Mitch McConnell as well as Democrats seeing it as a massively expensive undertaking for which there is, as yet, no need. Senate Democratic Leader Chuck Schumer said a tax cut is not the answer to every problem
Trump, Treasury Secretary Stephen Mnuchin and economic policy coordinator Larry Kudlow were all there on the Hill for the closed-door GOP lunch and Mnuchin afterward was sent over to talk to House Speaker Nancy Pelosi. Traders took note of Mnuchin’s mention outside the meetings of what he saw as “bipartisan urgency,” a reference that seemed to help lift stocks.
Pelosi and Schumer made it clear they have their own ideas about what’s advisable, including increased, more inclusive jobless benefits.
Some suggested that both the White House and Congress are aiming too low, that what will be most needed in the months ahead is emergency support to keep the business community’s cash flow from drying up to prevent massive layoffs. That might require all corporate taxation to be suspended, they said.
Kudlow was at the White House’s evening corona virus briefing in addition to Vice President Mike Pence and other member of the Corona Virus Task Force.
He confirmed that President Trump told Senate Majority Leader Mitch McConnell he would like to eliminate the payroll tax for at least this year, the tax that supports Social Security, somehow making up the foregone funds later out of general revenues.
“President Trump has unveiled his proposals, strong proposals, for a temporary payroll tax-cut holiday which I think he would prefer to last through the end of the year,” Kudlow said.
“I don’t want to get into any detail,” Kudlow continued, and he didn’t. The payroll tax “holiday” is “probably the most important, powerful piece of this,” he said, a “bold idea” from a “bold president.”
There are other things, though, that the White House can do without Congress, he added, some of which is already authorized in the $7.8 billion anti-virus package signed into law last week.
Among those programs could be reimbursement for unpaid sick leave and helping medium and smaller businesses in unspecified ways. Kudlow has previously said the White House can initiate “targeted” aid for airlines, hotels and cruise lines.
Each succeeding corona virus briefing seems to have a slightly more urgent and serious tone although Pence repeated Tuesday evening that “at this time” the risk to Americans is still generally low. But seniors, he and others on the Task Force added, are at significant risk. Precautionary measures spelled out at coronavirus.gov are a minimum of what everyone in the country should get used to, said several of the officials.
President Trump, who Monday night led reporters to believe he was going to hold a news conference sometime Tuesday after talking to the congressional leaders, spoke several times during the day and answered some questions but never did hold a news conference.
The National Institutes of Health’s Anthony Fauci said during the briefing he is not recommending all schools close, only those where it appears there is a special risk of community spread. Pence said such advice on closings will be “community specific.” Otherwise, there was little significant new information in the briefing not already disclosed elsewhere during the day.
Meanwhile, on the positive side, some analysts were cheered by the fact warmer climes, like Mexico with only eight virus cases, seemed to be faring better than to the north, raising hopes the corona virus really is temperature sensitive. Wags on Twitter said thank goodness for the border wall, blocking Americans’ southward flight.
In China, where it all started, the news that President Xi Jinping visited epicenter Wuhan was seen as proof the virus can be controlled. The state-controlled China Daily chastised the U.S. for what it said was its long delay in taking necessary anti-virus measures after receiving a genomic analysis.
On the negative side, there were a lot of unsettling developments for investors to overlook. More and more universities were telling their students to see their professors via laptop and stay away from classrooms.
New York’s Gov. Andrew Cuomo deployed the National Guard to clean a containment area at the site of the biggest U.S. virus cluster, an area of the New York City suburb of New Rochelle where large gatherings and school classes are now restricted. Travel in and out is not restricted.
Dozens of Seattle’s traffic cams showed how traffic jams are now hard to find in an area that was first to see a serious virus outbreak.
An analyst on CNBC warned that while Americans seemed to be preparing for a virus blizzard, instead the nation is only in the first weeks of a long corona virus winter.
Former Treasury Secretary Larry Summers told Bloomberg Radio he sees an 80% probability of recession.
Presidential candidates Joe Biden and Bernie Sanders, as primary returns came in from mini-Super Tuesday, both canceled rallies in Cleveland.
By far the most alarming view was that of the Hoover Institution’s Niall Ferguson, sometimes called a contrarian, who described, in a Wall Street Journal piece, how network effects, in which nodes and their “edges” dictate virus spread, can push the contagion around the country at near exponential speeds, regardless of testing, containment, mitigation and suppression. The challenge, he wrote, is to keep the infections to a linear trajectory and not escalating logarithmically.
On the economic front, warnings proliferated further about anticipated corporate debt defaults as demand withers. Defaults are already assumed a reality within the Oil Patch, which most analysts seemed to regard as the land of the walking dead now that Saudi Arabia and Russia are grabbing extra oil tankers to soon carry their threatened flood of oversupply.
Finally, the Treasury Department convened a conference call meeting during the day of the President’s Working Group on Financial Markets, a subset of the Financial Stability Oversight Council that included Federal Reserve Chair Jay Powell, Vice Chair for Bank Supervision Randall Quarles, heads of the SEC, FDIC, CFTC and Comptroller’s office as well as Treasury Secretary Mnuchin. The readout afterward revealed little other than the subject was the corona virus.
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Contact this reporter: denny@macenews.com