U.S. markets and stock exchange traded funds pared early losses on coronavirus fears and pushed higher Thursday as the financial sector led the charge, following regulator’s decision to ease some more stringent post-financial crisis requirements on banks.
On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 0.8%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) gained 0.9% and SPDR S&P 500 ETF (NYSEArca: SPY) rose 0.9%.
Financial stocks strengthened after U.S. regulators eased two rules covering large banks with complex trading and investment portfolios, Reuters reports.
The Federal Deposit Insurance Corp. said it would cut the amount of cash that banks are required to set aside as collateral to cover potential losses on swap trades, the Wall Street Journal reports. Other regulators signaled they plan to allow the changes.
The markets wobbled in early morning trade and investors remained cautious as the number of new COVID-19 cases in the U.S. increased, notably in the West and South, with Texas halting its reopening process due to a flare-up in infections and hospitalizations.
“As the virus develops that is the most important piece of news. The last few days the news has been disturbing. If anything it is surprising the markets haven’t reacted more negatively,” Tom Martin, senior portfolio manager at GLOBALT Investments, told Reuters.
“Markets are aware that the governments across the world and the central banks don’t want to let the negative effect on the economy get out of control,” Martin added. “That increases investors’ comfort in continuing to own stocks.”
Investors may be confident that the government may respond accordingly to support economic growth and keep the virus in check.
“They don’t seem to be going into lockdown, they want to avoid that as much as possible,” Jonas Golterman, senior markets economist at Capital Economics, told the WSJ. “Authorities have some sense of how to deal with it and there’s still the view out there that it’s unlikely we’re going to go into full lockdown—and that’s what really damages the economy.”
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