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Stocks rally fizzles despite new round of stimulus pledges

May 19, 2020, 8:49 AM UTC

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Good morning. A stimulus pact in Europe, a vaccine in the labs (courtesy of Moderna) and a commitment by the Fed to do whatever it takes gave equities markets a boost in early trade, before indices started to sink.

Let’s check in on the action.

Markets update


  • The major indices are all climbing, with Japan’s Nikkei up 1.8%.
  • China is locking down the city of Shulan (pop. 700,000) because of a new coronavirus outbreak there.
  • The world’s No. 2 economy is also creating a $2 billion fund to help other countries with their COVID-19 response. They may need to write a bigger check.


  • European bourses climbed higher at the opening this morning, led by Germany’s Dax, which was up 0.9% a half-hour into the trading session. An hour later, they were all in the red.
  • France and Germany agreed on Monday to back a €500 billion ($546 billion) rescue fund to help eurozone-ravaged countries. That they’ve agreed to anything is a bigger deal than the price tag, and that’s sending equities higher this morning.
  • Europe’s car market has been driven into a ditch. New auto registrations fell by 74% in April. Shares of BMW, Volkswagen and Daimler were trading lower on the news.


  • The Dow, S&P 500 and Nasdaq futures point to a flat open, looking to extend yesterday’s monster gains.
  • There are a growing number of market observers concerned about the size and speed of the equities rally, and that includes the Fed’s own economists.
  • Treasury Secretary Steven Mnuchin and Fed chairman Jerome Powell will address Congress today. Powell is expected to declare the central bank will use its “full range of tools to support the economy.” That’s music to stock traders’ ears.


  • Gold is up, slightly.
  • The dollar is down, slightly.
  • Crude is trading higher, looking to extend the rally in Brent and WTI to a fifth consecutive day.

Dry powder

The jury is out on whether stimulus packages will do the job in stimulating economic activity. (Some economists and social scientists are going so far as to suggest break-the-glass measures are needed to get helicopter money into the hands of the people to juice the global economy.)

But there’s a potent piece of stimulus ammunition we may be overlooking, says Calvin Schnure, senior economist at Nareit. “There’s a $2 trillion stimulus fund you haven’t heard about, and it’s growing bigger every day,” he writes.

It’s consumer savings, the levels of which have swelled over the past month when so many Americans were confined to their homes. By Schnure’s calculation, because consumers were unable to dine out, were forced to postpone travel, and couldn’t venture out to catch a film or a live performance, all those abandoned transactions means more money now sits in the bank, ready to be spent.

“Savings have jumped as a result, with the personal saving rate increasing to 13.1% in March, from 7.7% in January. And savings likely increased further in April and early May,” he writes.

He breaks out the size of America’s swelling piggy bank in today’s chart.

As the economy slowly reopens, businesses could very well be greeted by a flush consumer anxious to spend. After all, rock-bottom interest rates leaves little incentive to keep all that cash in the bank earning next-to-no-return. If recent savings trends continue, he writes, “by the time the economy reopens there could be as much as $4 trillion in consumer spending power available to help jump-start the economy.” That would be roughly twice the size of the CARES Act.

It’s a fascinating hypothesis, and one worth watching. I think there’s a lot of validity in it. Now that businesses have reopened here, we’re scribbling in the calendar all manner of to-do’s like: “dentist appointment,” “call the electrician,” and new “tires for the car.”

That starts to add up.


Have a nice day everyone. I’ll see you here tomorrow.

Bernhard Warner

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Today's reads

Cure-all. Nasdaq-listed Moderna Therapeutics (MRNA) was one of the high-fliers in yesterday's rally. Before the bell on Monday, the biotech firm announced a round of positive early results from the trials of its COVID-19 vaccine candidate, mRNA-1273. Shares closed at $80, up 20%, and investor enthusiasm spilled out into the broader markets.

Life, the universe and everything. On Friday night, author J.K. Rowling asked Twitter to explain bitcoin—as in, what is it? "It didn't take long for a band of cryptocurrencies enthusiasts on social media—known colloquially as "crypto Twitter"—to flood Rowling's account with thousands of replies," my colleague Jeff John Roberts writes. The exchange didn't go well. Did I mention she had knocked back a few Old Fashioned cocktails before and during this lesson (or so she said)?

(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)

Market candy

17 and 52

Just as I was pressing "send" on Bull Sheet yesterday, Fortune's annual Fortune 500 list went live on the site. I have so much great corporate data to work with that I'll be turning a few choice pieces into "Market Candy" nuggets throughout the week...

17 corresponds to the number of new companies to make the 2020 list, including Uber (No. 228), Fox Corp. (No. 280), and Science Applications International (No. 466).

52 = the number of companies to appear on the Fortune 500 every year since the list's debut in 1955, including Exxon Mobil, General Motors, Chevron and General Electric.