Wall Street tumbles, global stocks slide as coronavirus drives week’s frenzy - The Washington Post

Driving the sell-off is a record low in the yield of the U.S. 10-year Treasury that is alarming Wall Street because at their current price, bonds are paying less than 1 percent interest. The 10-year Treasury is a crucial global financial measure that is a reliable indicator of future economic health as well as a marker for mortgage rates and car loans. Global investors are fleeing stocks for the safety of the 10-year notes, which are viewed as a bulwark against financial mayhem, because of fears that world economies may deteriorate as the outbreak rages on.

“The low yield on the 10-year Treasury is a sign that the investors are very concerned about future growth in the economy,” said Eric Jacobson, senior fixed income research analyst at Morningstar. “That’s what happens. When people are worried about everything else, they run to Treasury’s because they know they are going to get paid back.”

The trading day was rougher in Europe, with the benchmark Stoxx 600 index and Germany’s DAX both plummeting 3.5 percent, France’s CAC 40 down 4 percent and Britain’s FTSE 100 slid 3.3 percent.

Asian markets were less bruised then Europe, due in part to reports that China industries may be stabilizing. Hong Kong’s Hang Seng Index declining 1 percent and the tech-heavy Shanghai Index sliding 1 percent. Japan’s Nikkei was done around 3 percent early Friday.

“While the rest of the world is freaking out, China’s going back to work," said Mark Greeven, professor of innovation and strategy at the IMD business school in Lausanne, Switzerland, in an email.

At Thursday’s close, U.S. stocks had declined a total of $3.67 trillion in value since the market’s high on Feb. 19, according to Howard Silverblatt of S&P Dow Jones Indices.

“The easiest path during this period of uncertainty is to sell first and ask questions later,” said Sarat Sethi of Douglas C. Lane & Associates. “People need to be prepared for this to continue for a little while. The reaction to this virus will slow economic activity for at least the next couple of quarters. But it won’t permanently impair the economy.”

The three leading U.S. stock indexes tipped into a correction for the second time this week. A correction is a 10 percent decline from recent highs.

The Dow closed down almost 970 points Thursday as investors fled stocks and headed for the safety of U.S. debt. The Dow ended Thursday 3.5 percent lower on the day to finish at 26,121. The S&P 500 fell to 3,023, a 3.4 percent drop. The technology-laden Nasdaq Composite slid to 8,738.60, erasing 3.1 percent of its value.

All 11 S&P sectors had finished negative, with financials, industrials and energy the worst performers. All 30 Dow blue-chip stocks were in the red. United Technologies, aerospace giant Boeing, JP Morgan Chase and Goldman Sachs were among the Dow’s biggest drags. Profits for financial firms decline in a low-interest rate environment.

Thursday’s market trauma followed an exuberant Wednesday when investors — heartened by Joe Biden’s Super Tuesday victories — propelled the Dow nearly 1,200 points upward, more than 4.5 percent, while the S&P 500 and the Nasdaq climbed 4.2 percent and 3.85 percent, respectively. The bounce came after the International Monetary Fund committed $50 billion to fight coronavirus in low-income and emerging-market countries.

“The safest thing to buy in these markets is Dramamine,” said Michal Farr, chairman of Farr, Miller & Washington. “The violent volatility of up 1,100 points one day and down 950 the next leave investors with a serious case of whiplash.“

Lack of clarity on where the virus was headed had dulled investors’ attempts to bring some equilibrium to stock and bond markets.

“Despite all the talk about the virus, the truth is that no one knows what path it will take, how long it will last, and how severe it will be,” said Nancy Davis, chief investment officer of Greenwich, Conn.-based Quadratic Capital in a note this week. “So the uncertainty will continue to feed higher volatility.”

The flight to debt sent the yield on the 10-year U.S. Treasury — a global financial mainstay — to record lows. The trajectory could be an ominous sign of a weakening economy, because a low yield can indicate a lack of confidence in economic growth. Yields decline as bond prices rise. Gold, another safe haven, climbed 1.5 percent. Meanwhile, mortgage rates also hit record lows.

The market mayhem caused by coronavirus anxiety may ease after President Trump signs a $8.3 billion emergency spending bill to combat the coronavirus that the Senate passed on Wednesday.

The money includes research funds to find a virus vaccine and assistance to local communities to combat the epidemic. It also will help fund small businesses to help them navigate the crisis.

Trump had indicated he would sign any coronavirus legislation that came to his desk.

The global death toll from the coronavirus had surpassed 3,200, and more than 97,000 people have been infected. The outbreak’s hold on the United States is also tightening, with California declaring a state of emergency after its first coronavirus-linked death brought the nation’s death toll to 11.

The outbreak has disrupted global supply chains and threatens to stymie economic growth since the first cases emerged in Wuhan, China, in late December, roiling markets across the globe. Trump has staked much of his argument for reelection on the strength of the economy and of Wall Street, which had been setting record highs as recently as three weeks ago.

Global travel is plummeting as event cancellations and travel restrictions mount, delivering a brutal blow to tourism, aviation, cruises and hospitality.

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https://www.washingtonpost.com/business/2020/03/06/stocks-today-coronavirus-markets/

2020-03-06 14:31:00Z
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