Good morning.

Ugliest ever. That’s the assessment for today’s Q2 GDP report, which lands at 8:30 a.m. ET. U.S. futures have been ticking lower and lower all morning. The Fed’s Jerome Powell warning yesterday that the “economic downturn is the most severe in our lifetimes” is weighing over global markets. That’s despite a few surprise earnings beats.

Let’s spin the globe, and see what’s moving markets.

Markets update

Asia

• The major Asia indexes fell in afternoon trade with the Hang Seng down 0.7%.
• Samsung issued a big earnings beat on Thursday, forecasting a surge in demand for memory chips in the second half of the year.
• But it’s not all good news for the Korean tech giant. Huawei surpassed it as the world’s largest smartphone maker, thanks to its dominance in China.

Europe

• An hour into trading, the European bourses were in the red with Germany’s DAX down 2%.
• It’s the busiest day of the year for European corporate results. Among the surprise beats are from AB InBev and Royal Dutch Shell. Shares in the brewer were up 0.7%; the oil giant’s shares were down 0.1% 30 minutes into the trading session.
• Airbus, like its chief rival Boeing, had mostly bad news for investors. It’s cutting back production on its workhorse A350 aircraft. It also warned restructuring costs will climb. Shares were down 2.6% at the open.

U.S.

• U.S. futures are trading lower, set to erase yesterday’s gains. Kodak was Wednesday’s big winner, soaring 300% after the legacy camera company reported it had received a $765 million loan from Uncle Sam to start producing pharma products. Yes, Robinhood day traders are behind this rally.
• In a sign of the times, the markets had their best day of the week despite former juggernauts Boeing and General Electric[/hotlink] reporting massive losses, and the U.S. surpassing 150,000 coronavirus deaths. On the front page of today’s Wall Street Journal this headline says it all: the U.S. “leads the globe” in COVID deaths and infections. Right next to it: markets climb! <= That’s thanks to the Fed.
• It’s GDP day. The initial Q2 reading comes out in a few hours, and it’s expected to be UGLY with economists forecasting a near-35% annualized drop, the worst slump since the 1940s.
• The Dems and Republicans are “nowhere close to a deal” on the next round of stimulus spending and unemployment benefits. A lousy GDP reading will likely focus the collective minds in Washington.

Elsewhere

• Gold is flat, a hair below $1,950 an ounce.
• The dollar is trading a tick higher.
• Crude is off slightly.

***

Fed up

It’s the virus, stupid.

That’s the key to economic recovery, Fed Chair Jerome Powell told us in his “worst in our lifetime” address yesterday. The Biden and Trump campaigns would be wise to adapt their strategies accordingly.

Don’t believe me. Cast your eyes on this chart (courtesy of the economists at Berenberg). The red team hasn’t quite grokked this point, you might say.

We’ve long known that a strong economy wins elections. And the only chance of that is flattening the curve and restoring consumer confidence that it’s safe to get out of the house and spend—and, that it’s safe for employers to hire back staff and re-invest in operations.

That’s easier said than done. As UBS economist Paul Donovan wrote in an investor note this morning, “the path of the economy depends on the path of fear of the virus.”

The Fed knows this. And so it’s telling the markets it’s committed to keeping companies solvent amid the downturn by keeping the credit taps flowing. The central bank’s biggest move this week was to extend by three months most of the emergency loan programs through year-end. That commitment sent markets higher yesterday.

The hard part will be boosting the fortunes of Main Street.

Despite yesterday’s rally, there are dark clouds on the horizon. One is the real fear of a double-dip recession, says Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence in Dallas, and a former advisor to the Dallas Fed.

He presents a scenario that’s getting more air play these days. And that is: Does “whatever it takes” mean the Fed will buy—gasp!—equities? You’ll hear this debate more and more in the coming weeks should the economic data—not to mention the COVID data—prove to be really bad, and if Washington fails to act on a meaningful round of stimulus.

“The reality of a double-dip recession,”DiMartino Booth says, “will push the Fed’s hand in the coming weeks ahead of the critical September meeting. Worsening economic data and heightened election uncertainty strengthens the case for the Fed to step in and buy stocks.”

Remember: in an election year, anything’s possible.

“Rather than negative interest rates,” she continues, “this preferred path is what the markets should price in if the stock market corrects in reaction to persistently high COVID-19 cases and rising fatalities.”

It’s important to note that the Fed doesn’t have the authority to straight-up buy stocks. It would need Congressional approval for that. But it has been buying corporate bond ETFs in the open market since March.

Incidentally, I joked with an analyst back then that a true stimulus plan would be to forego stimulus checks and instead give American families shares in S&P-tied ETFs.

I repeat, I was joking.

The Fed isn’t.

***

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

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Cash is dead. I'm old enough to remember when was "king." PayPal shares are climbing in pre-market trading today after the company announced after the bell on Wednesday a record top-line performance. As Fortune's Jeff John Roberts writes, "PayPal executives said society has reached an 'inflection point' when it comes to the 'death of cash,' and noted that 70% of consumers now fear for their health when it comes to paying in stores."

The great share-price disconnect. Warren Buffett and the late Milton Friedman have a preferred metric to value stocks. That measure is way out of whack, writes Fortune's Shawn Tully, and that doesn't bode well for investors.

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Market candy

$600

As in the great $600 question: Did the extra 600 bucks-per-week in unemployment benefits act as a disincentive that kept laid-off Americans from going out and finding more work? That's become a popular theory among fiscal hawks. Kate Davidson at the Wall Street Journal runs the numbers, and finds the theory doesn't quite add up.