Stocks traded sharply Friday afternoon as investors focused on the number of confirmed cases of COVID-19 globally hitting 100,000 and the failure of key oil producing nations to agree on further crude oil output curbs to help the tumbling commodity find a floor on prices.
The spread of the coronavirus world-wide has placed pressure on safe-haven assets, notably driving the U.S. Treasury 10-year bond yield to a new record low below 0.8%, reflecting increased worries about the economic impact of the disease world-wide.
See:Why stocks tanked despite the Fed’s emergency rate cut
How are major benchmarks faring?
The Dow Jones Industrial Average
DJIA,
-2.12%
dropped 614 points, or 2.4%, to 25,507, while the S&P 500
SPX,
-2.90%
was down 94 points, or 3.1%, at 2,929. The Nasdaq Composite
COMP,
-3.03%
dropped 298 points, or 3.4%, to 8,440.
On Thursday, the Dow closed at 26,121.28, down 969.58 points, or 3.6%, while the S&P 500 lost 106.18 points, 3.4%, to close at 3,023.94. The Nasdaq fell 279.49 points, 3.1%, to close at 8,738.60.
For the week, the Dow was clinging to a 0.5% gain, the S&P 500 was off 0.7% and the Nasdaq has shed 1.3%, as of Friday afternoon.
What’s driving the market?
Stocks are ending a volatile week with further losses as the spread of the viral outbreak that was first identified in Wuhan, China impacts economic activity, accelerating purchases of assets perceived as safe havens and placing further pressure on those considered risky like stocks.
Adding to market woes, oil futures plunged by more than 7% on Friday as talks between the Organization of the Petroleum Exporting Countries and their allies collapsed, with Russia refusing to agree to a Saudi-led plan for additional crude production cuts.
“There is an element to this that’s like dynamite fishing,” said Hans Olsen, chief investment officer at Fiduciary Trust Company, about the shocks to stocks and other financial assets from U.S. spread of the coronavirus. “The boom happened last week. Now we have to wait for the casualties to emerge,” he said of potential distress in financial assets.
The ongoing selloff overshadowed a better-than-expected jobs numbers from the Labor Department, which reported that the U.S. created 273,000 new jobs in February. However, the data was compiled before the coronavirus contagion spread world-wide. Economists polled by MarketWatch had forecast a 165,000 increase.
“The US [jobs] number was decent but it failed to tame the turmoil in the equity markets and investors are not even remotely interested in riskier assets,” wrote Naeem Aslam, chief market analyst at AvaTrade in a note after the nonfarm payrolls report.
The unemployment rate fell a notch to 3.5% and matched a 50-year low, with average wages paid rising 9 cents, or 0.3%, to $28.52 an hour.
“The COVID-19 infection rate is multiplying and more states in the U.S. are imposing emergency orders,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Friday note.
The disease has sickened 100,000 people so far and the death toll has risen to 3,300 while disrupting international trade and travel, compelling central banks to reduce their benchmark interest rates. On Tuesday, the Federal Reserve cut its federal-funds target rate by a half a percentage point to a 1%-1.25% range, in the first emergency rate cut by the U.S. central bank since the 2008 financial crisis.
See:COVID-19 case tally: 100,113 cases, 3,404 deaths
Late Thursday, Dallas Fed President Rob Kaplan said the epidemic’s impact might last for three to five months but expressed optimism about the U.S. chances of avoiding a recession due to the illness.
“I still believe we can get through this year without a recession,” Kaplan said, in an interview on Bloomberg Television. Kaplan is a voting member on the rate-setting Federal Open Market Committee’s which will meet on March 17-18.
However, some are doubtful that policy makers have the firepower to curb the potential economic harm from a deadly pathogen that is spreading rapidly.
“We disagree with central bank pronouncements that there is room to fight the crisis.” wrote George Saravelos, Deutsche Bank’s head of global head of currency research, in a recent research note.
Optimistic market participants, however, say, one positive takeaway from the jobs report is that it reflects that the domestic economy stands on a solid footing as it braces for the impact the infectious disease might bring. “Given the strength of the data though, the economy appears to have enough positive momentum to slow for a time without significant risk of tipping into recession,” wrote Jim Baird, chief investment officer for Plante Moran Financial Advisor, in a Friday research report.
Which stocks were in focus?
-
TSLA,
-3.55%
Tesla Inc.s stock was down 3.3% Friday, extending Thursday’s decline.
-
AAPL,
-2.63%
Apple Inc.’s stock price target cut to $295 from $395 at Deutsche Bank. Shares fell 2.9%.
-
BGG,
-5.20%
Briggs & Stratton Corp. shares were up 2.3% after the company announces a charge.
-
ON,
-4.09%
Apple supplier ON Semiconductor Corp. issued a revenue warning for the first quarter on Friday, due to the change in business conditions being created by the coronavirus COVID-19. ON shares edged up 0.4%.
-
SKX,
-1.72%
Skechers USA Inc. shares slid 3.2%, after the sporting shoe retailer said the fallout from the coronavirus has gotten worse since it last updated investors when it reported earnings last month.
-
COST,
-3.04%
BJ,
+3.04%
KR,
-4.75%
Shares of Costco Wholesale Corp. , BJ’s Wholesale Club Holdings Inc. and Kroger Co. were trading higher, boosted by a surge in demand for hand sanitizer, cleaning and disinfecting materials, canned and dry grocery items and other products associated with the fight against the spread of COVID-19.
-
JPM,
-6.15%
MSFT,
-4.42%
Leading the Dow’s slump were shares of JP Morgan Chase & Co., which were down more than 5% as CEO Jamie Dimon was recovering from an emergency heart-related surgery, and Microsoft Corp. , which traded more than 4% lower.
How are other assets performing
The benchmark U.S. 10-year Treasury note
TMUBMUSD10Y,
0.749%
dipped to a fresh yield low, currently trading at 0.74%. Bond yields rise as prices fall.
Gold for April delivery
GCJ20,
+0.48%
finished a choppy session 0.3% higher at $1,672.40 an ounce, but had been approaching the psychologically important, round-number price of $1,700, before paring gains after the jobs report.
April crude futures
CLJ20,
-10.28%
were 7.8% lower on the New York Mercantile Exchange as Russia resisted a call by its OPEC allies to made additional cuts to crude output.
The Cboe Volatility Index
VIX,
+23.17%
rose 19.5% to 47.36 on Friday. The VIX is a gauge of implied volatility in the stock market. Its historic average is around 19.
The U.S. dollar
DXY,
-0.87%
was down 0.8%, as gauged by a gauge of a half-dozen currency trading partners. The index is down 2.4% so far this week,
In Europe, stocks finished broadly lower. The FTSE 100
FTSE,
-1.93%
was 3.6% lower, and the Stoxx Europe 600 index
SXXP,
-3.66%
closed 3.7% lower.
In Asia overnight, the Shanghai Composite Index
SHCOMP,
-1.21%
fell 1.2% and Tokyo’s Nikkei 225
NIK,
-2.71%
skidded down 2.2%. The Kospi
180721,
-2.16%
in Seoul lost 2.2%. China’s CSI 300 Index
000300,
-1.62%
retreated 1.6%.
