ANALYSIS: S&P falls for seventh day, suffers biggest weekly plunge since 2008 crisis

February 29, 2020  02H:47  GMT/ZULU

by Judith Stein and Biodun Iginla, BBC News and Reuters Business News Analysts, New York

New York - The S&P 500 fell for the seventh straight day on Friday and the benchmark index suffered its biggest weekly drop since the 2008 global financial crisis on growing fears the fast-spreading coronavirus could push the economy into recession, although stocks regained some ground right at the end of a volatile session.

The Dow and the Nasdaq also registered their deepest weekly percentage losses since October 2008.

The Nasdaq managed to eke out an 0.01% gain after plunging as much as 3.5% during the session. After falling as much as 4.2% - more than 1,000 points - the Dow ended the day down 1.4%.

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But, after the bell, S&P 500 e-mini futures EScv1 were up about 1% and the Invesco QQQ Trust ETF was up 1.3% in extended trade.

On Thursday, all three indexes had confirmed corrections by finishing more than 10% below their closing record highs.

Equities found some support after U.S. Federal Reserve Chair Jerome Powell said the fundamentals of the American economy remained strong and that the central bank would act as appropriate to provide support.

A screen shows the Dow Jones Industrial Average during trading on the floor at the New York Stock Exchange (NYSE) in New York, U.S., February 28, 2020. REUTERS/Brendan McDermid

But investors had spent most of the day dumping equities for the safety of U.S. Treasuries, pushing 10-year yields to their fourth record low this week. [US/]

The virus spread further on Friday, with cases reported for the first time in at least six countries across four continents, battering markets and leading the World Health Organization (WHO) to raise its impact risk alert to “very high.”

Some investors voiced concerns about heading into a weekend where they could not trade on new reports about the virus.

“To get an all-clear sign, the market needs evidence it’s under control, no flaring up in new countries and that we don’t get a significant outbreak in the United States,” said Jack Janasiewicz, chief portfolio strategist for Natixis Investment Managers.

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Janasiewicz saw the spread of the virus China as a prompt to reduce exposure to riskier assets, and said the next milestone for further risk cuts would be a U.S. outbreak.

The Dow Jones Industrial Average .DJI fell 357.28 points, or 1.39%, to 25,409.36; the S&P 500 .SPX lost 24.54 points, or 0.82%, to 2,954.22; and the Nasdaq Composite .IXIC added 0.89 point, or 0.01%, to 8,567.37.

The CBOE volatility index, also known as Wall Street’s fear gauge ended the day near its session low, up 0.95 point at 40.11, after rising as high as 49.48.

Of the S&P’s 11 major sectors, the rate-sensitive financial index .SPSY weighed the most on the benchmark S&P 500 index, ending the day down 2.6%. The utilities sector .SPLRCU was the S&P’s biggest percentage loser with a 3.3% drop. Real estate .SPLRCR and consumer staples .SPLRCS - also rate-sensitive sectors that are often seen as safe havens - both fell more than 2%.

Slideshow (4 Images)

Yet the energy .SPNY, technology .SPLRCT and communications services index .SPLRCL all showed gains for the day.

Declining issues outnumbered advancing ones on the NYSE by a 3.39-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 129 new lows; the Nasdaq Composite recorded 19 new highs and 538 new lows.

Trading was brisk on U.S. exchanges with 19.31 billion shares changing hands compared with a 9.25 billion-share average for the last 20 days.

Our Standards:The Thomson Reuters Trust Principles.

ANALYSIS: Presidential hopeful Bloomberg proposes new taxes, protections to rein in Wall Street

February 19, 2020  02H:06  GMT/ZULU

by Judith Stein and Biodun Iginla, BBC News and Reuters Business News Analysts, New York

NEW YORK  - U.S. Democratic presidential candidate Michael Bloomberg on Tuesday outlined a sweeping financial services policy proposal to rein in Wall Street trading, boost consumer protections, increase Americans’ access to banking services and crack down on financial crime.

FILE PHOTO: Democratic U.S. presidential candidate Michael Bloomberg addresses a news conference after launching his presidential bid in Norfolk, Virginia, U.S., November 25, 2019. REUTERS/Joshua Roberts/File Photo

The left-leaning platform marks a striking turnaround for the former Republican New York mayor and Wall Street investment banker who made his $60 billion fortune in financial services and in the past has criticized reforms introduced following the 2007-2009 financial crisis.

Trying to make a virtue of his Wall Street heritage, Bloomberg’s campaign argued on Tuesday that “as the founder of a successful global financial technology company, he understands the system well and is uniquely qualified to make it work better for all Americans.”

Among the most eye-catching proposals are a tax of 0.1% on transactions in stocks, bonds and payments on derivative contracts, bolstering the “Volcker Rule” ban on banks’ proprietary trading and setting a trading speed limit - all of which take aim at Wall Street clients of Bloomberg Inc’s trading terminal.

The proposal also pledges to reinforce protections eroded by the Trump administration by boosting bank capital levels, toughening banks’ annual health checks and restoring the Consumer Financial Protection Bureau’s rules curbing payday lending and its ban on imposing mandatory arbitration on consumers.

Bloomberg also waded into the long-running debate on the future of housing finance giants Fannie Mae and Freddie Mac, which were bailed out during the financial crisis. He proposed to merge them to ensure taxpayers are fully compensated for the risks of guaranteeing the firms’ securities.

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While Bloomberg’s platform does not go as far as proposals backed by progressive rival presidential candidates Elizabeth Warren and Bernie Sanders, who have called for big banks to be broken up, it underscores how far the Democratic Party is moving to the left on financial and corporate policy issues.

Bloomberg, a latecomer to the race who has so far spent $188 million of his own money on the campaign, will step onto the Democratic debate stage for the first time on Wednesday after exceeding the double-digit polling threshold set by the Democratic Party, with 19% support.

“Our sense is that these proposals are primarily intended to blunt progressive attacks, especially with Bloomberg joining the debate stage for the first time on Wednesday evening,” Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading, said in a note.

“But the overarching tone of the proposals underscores the populist shift in the Democratic party and the heightened potential for significant policy shifts.”

Bloomberg has previously proposed major tax hikes on the wealthy, including a higher capital gains rate and a 5% surtax on annual incomes that exceed $5 million.

His newest proposal would also address the student loan crisis by automatically enrolling undergraduate students in income-based repayment plans, installing caps on debt payments and making it easier to discharge student debt via bankruptcy. It would curb debt collection agencies and bank overdraft fees.

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Touching on a key theme of Warren and Sanders, Bloomberg also proposed measures to boost Americans’ access to the financial system by offering a range of banking services through the U.S. Postal Service, as well as launching a pilot program for free or nearly no-cost bank accounts.

Adopting another familiar Democratic idea, Bloomberg proposed a new “corporate crime” team at the U.S. Department of Justice that would be discouraged from using non-prosecution agreements, which impose fines without criminal charges.

LOBBYING PUSHBACK

The proposals, in particular a transaction tax, are likely to spark strong pushback from the financial lobby, which is already fighting aggressively to rebut the idea. Such a tax was rejected by the Obama administration, but it has gained traction in Democratic circles in recent years.

Under Bloomberg’s plan, the tax would be phased in gradually, starting at 0.02%, to “minimize any unintended consequences.”

Ken Bentsen, CEO of the Securities Industry and Financial Markets Association, said a transaction tax would hurt middle class savers and retirees.

“At a time when market development, efficiency and competition are driving the cost of investing toward zero, it makes little sense to increase the cost through what is essentially a sales tax. Further, the threat such a tax poses to the efficiency of the U.S. capital markets is real. It begs the question, ‘What’s the point?’”

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Bloomberg began his career at investment bank Salomon Brothers, where he became a partner before later being laid off amid a company merger. He subsequently founded Bloomberg, the financial information and media giant whose desktop terminal is synonymous with Wall Street trading.

Many Democratic-leading financiers had seen Bloomberg as a safe pair of hands and on Tuesday some analysts played down the risk his presidency would pose to the industry.

“To win, a Democrat needs a plan to focus on big banks,” said Cowen Washington Research Group analyst Jaret Seiberg in a note “Bloomberg understands markets, which makes it less likely that he would push policies that could hurt the economy.”