The indices are ripping higher today as bears and underinvested bulls are caught by surprise as the market celebrates positive news from Gilead (GILD) on its coronavirus drug. The news is important because the drug is shown to have some impact on the virus and that will allow for the development of even better treatments over time.
Many market players are growing weary of trying to keep pace with this market that won't give us easy entry points. The action is easily explained as being due to the massive stimulus provided by fiscal and monetary policy but the lack of concern about the economic impact is hard for many of the more risk-averse investors to understand.
The FOMC has just issued its interest rate decision and it notes:
"The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. The disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses."
We already know that the Fed is going to take all necessary measures to support the economy and it reiterated that in the policy statement.
Fed Chair Jerome Powell will hold a press conference shortly, but for now the big question is whether this may be a 'sell the news' event for the market. There is nothing new in this decision. It just confirms what we already know and Powell is not likely to announce any new policies today.
The indices are extended, sentiment is downright frothy and we are seeing some selling on the news. We have big earnings reports after the close and they may prevent the bears from pressing at this point.