Dow Jones Index Aims Higher Following Fed Chair Powell, Secretary Mnuchin Testimony
Fed Powell, Secretary Mnuchin, Cares Act, Economy, Dow Jones Index – Talking Points:
- Fed Chair Powell, and Secretary Mnuchin supplied the first quarterly update on CARES Act
- US Equity markets rise modestly following Senate testimony
- Fed Main Street Lending Facility to be operational shortly
Federal Reserve Chairman Powell and Treasury Secretary Mnuchin provided testimony Tuesday morning to the Senate Banking Committee regarding the CARES Act. The testimony is the first quarterly commentary from Powell and Mnuchin, required by the CARES Act. Lawmakers focused in on questioning facilities, particularly, the Main Street Lending Program, and the municipal Liquidity Facility. Dow Jones price action, along with other US equity markets, moved slightly higher following the commentary. Tuesday’s price action follows a strong start to the week for the Dow Jones as it now sits under a 2016 trend line.
Dow Jones Index (1-Min Chart)
Source: IG Charts
Lawmakers also displayed concern with CARES act funding, and the lack of those funds being allocated on time. When pressed, Secretary Mnuchin notes the delay stems from the time it has taken to get the facilities up and running. However, the Treasury Secretary emphasized that he is committed to deploying the remainder of funds. Mnuchin also noted that the Treasury is willing to take on some risks in deploying the existing funds and is prepared to “take losses” with capital used in leveraging those funds.
Recession risks were also harped on during the nearly three-hour virtual testimony. Senators cited troubling economic forecasts when asking Fed Chair Powell on the chances for a recovery, and the potential for a prolonged pullback in economic activity amid the ongoing COVID-19 pandemic. Fed Chair Powell said that we are in an unprecedented event that may require more support. Focusing on unemployment, Chair Powell stated that prolonged periods of unemployment can inflict lasting damage onto the economy. Recent developments on a COVID-19 vaccine from Moderna were cited as encouraging for the economic outlook by Secretary Mnuchin, when asked.
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