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  • US Dollar strength has continued today, with the $DXY hitting an intraday high around 91.20. The index is now trading slightly lower, currently around 91.05, as markets wait for Powell's speech at 12:05 EST. $USD https://t.co/rxdvVhXGVX
  • $USDCAD is weaker in the aftermath of OPEC+'s decision to hold output steady, falling to trade back around the 1.2600 level. The pair fell to its lowest level in nearly three years during last week's volatility, rebounded to a high of 1.2730, and has then edged lower. $USD $CAD https://t.co/QBVe8X5nVO
  • Russia reportedly has been given an exemption from OPEC+ supply deal - Delegates
  • The Canadian Dollar is surging alongside the rise in oil prices following OPEC+'s decision to hold output steady. $CADJPY has risen above 85.00 to trade at its highest levels since late 2018. $CAD $JPY https://t.co/YzikqjWyvT
  • $WTI Crude Oil is extending its gains, rising above 64.00 to trade at its highest levels in over a year. $OIL $USO https://t.co/7aFsMmJd7x
  • OPEC+ decides not to hike output by 500kbpd in April - Delegate Oil prices at highs of the day https://t.co/UBAtzuEs0b
  • Forex Update: As of 15:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.29% 🇨🇦CAD: 0.29% 🇦🇺AUD: 0.21% 🇪🇺EUR: -0.26% 🇯🇵JPY: -0.53% 🇨🇭CHF: -0.56% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/dULwFuQVcF
  • OPEC+ is close to keeping output unchanged in April - Delegates #OOTT
  • Indices Update: As of 15:00, these are your best and worst performers based on the London trading schedule: Wall Street: 0.09% US 500: 0.04% France 40: 0.04% FTSE 100: -0.13% Germany 30: -0.16% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/raVqHjfXWM
  • RT @Amena__Bakr: Saudi Arabia is proposing a rollover for April and May- delegates #OOTT #opec
Stock Market Forecast: Recession Likely Unavoidable Amid Virus Fallout

Stock Market Forecast: Recession Likely Unavoidable Amid Virus Fallout

Rich Dvorak, Analyst

STOCK MARKET FORECAST: RECESSION RISK TO PRESSURE DOW JONES AS ECONOMIC COST OF CORONAVIRUS MOUNTS, WILL LIKELY TRUMP FED LIQUIDITY & FISCAL STIMULUS

  • The stock market gyrated wildly over the last few trading sessions as investors try to ascertain whether fiscal stimulus and the FOMC can trump economic cost of the coronavirus
  • Dow Jones price action printed its biggest weekly gain since the 1930s even though the major stock market index remains down 25% year-to-date
  • Recession risk looms large with the economy likely facing one of the sharpest and most abrupt downturns in modern history

The Dow Jones Industrial Average soared nearly 13% last week as stocks attempt to recover from their sharp selloff that ended the longest bull market in history. Stocks began to stabilize on the back of unlimited QE announced by the Fed earlier this week, and a $2 trillion fiscal stimulus bill just signed into law by President Trump, which both aim to offset economic turmoil caused by the coronavirus lockdown.

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HAVE STOCKS & THE DOW JONES BOTTOMED OR IS THIS JUST A BEAR MARKET BOUNCE? (CHART 1)

Dow Jones Price Chart Stock Market Forecast Coronavirus Recession

Chart created by @RichDvorakFX with TradingView

In fact, the improvement in investor optimism, largely catalyzed by a tsunami of stimulus measures from the Federal Reserve and US Congress, helped the Dow Jones jump higher and notch its best weekly gain in decades. However, the Dow is still down by more than 20% from recent highs, and the major stock market index could face further downside considering the risk of recession that looms.

What Markets are Rising as the Dow Jones and Oil Collapse?

As markets try to strike balance between how deep the coronavirus recession will be with how quickly stimulus can hit the economy (and whether it will be enough to offset economic damage), more pain might be ahead for stocks. This is in consideration of dismal data readings that have only started to reveal the dire state of the economy.

RECESSION, CORONAVIRUS RECESSION SEARCH INTEREST AT PEAK POPULARITY (CHART 2)

Chart of Coronavirus Recession Search Interest Stock Market Forecast

Search traffic is at peak popularity for recession and coronavirus recession. Likely resulting from the coronavirus lockdown, this highlights the degree of anxiety felt by many Americans, which could weigh on their future spending habits and exacerbate downward pressure on the US economy. That said, business activity is already contracting at an alarming rate.

IHS MARKIT US PMI RECORD DROP IN SERVICES BUSINESS ACTIVITY (CHART 3)

IHS Markit PMI Chart Historical Data Recession Likely Amid Coronavirus Lockdown

Chart Source: IHS Markit PMI

In fact, the flash IHS Markit PMI report for March indicated that the US composite output index plunged to its lowest reading on record. The manufacturing and services sectors, which comprise roughly 11% and 68% of US GDP respectively, witnessed their sharpest declines since the global financial crisis. Amid widespread cost cutting and reduction in capacity, the latest Markit PMI report also indicated how firms have started to slash jobs. This is a trend that will likely accelerate as the coronavirus lockdown drags on.

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CORONAVIRUS LOCKDOWN BREAKS US JOBS MARKET; INITIAL JOBLESS CLAIMS NOTCH UNPRECEDENTED SPIKE (CHART 4)

US Initial Jobless Claims Weekly Historical Data Coronavirus Recession Risk

On that note, a record-smashing spike in jobless claims reported last week, which topped even some of the most pessimistic market estimates, emphasizes the unparalleled headwinds threatening the US and global economy. Recession risk stands to grow exponentially as the number of furloughed workers mounts – even despite the enormous $2 trillion coronavirus stimulus bill – seeing that the $1,200 cash windfall per adult likely pales in comparison to lost income from becoming unemployed.

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CONSUMER SENTIMENT PRINTS BIGGEST DROP SINCE OCTOBER 2008 FINANCIAL CRISIS (CHART 5)

Consumer Sentiment Index Price Chart Historical Data Coronavirus Recession Stock Market Forecast

The deterioration in consumer sentiment is another gloomy economic datapoint underscoring the economic impact of COVID-19. As recession risk intensifies and the stock market sinks, consumer sentiment data for March recorded its biggest drop since October 2008, driven by the worrisome deterioration in both current conditions and future expectations.

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Although massive amounts of fiscal stimulus and Fed liquidity have calmed market angst for now, further degradation in business activity, jobless claims and consumer sentiment could be imminent. Seeing that the aforementioned indicators likely reflect the ‘tip of the iceberg’ with regards to economic fallout from the novel coronavirus,the rebound just notched by the Dow Jones and broader stock market might prove short-lived. Consequently, prudent investors may want to err on the side of caution by adhering to strict risk management trading strategies and looking toward safe-haven assets in lieu of stocks.

Keep Reading: Gold Price to Resume Ascent as Fed Asset Purchases Balloon

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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