Topline: U.S. stocks recovered some losses on Thursday and oil prices soared, though the modest gains were not enough to offset the damage done by a weeks-long sell-off.
The Dow Jones Industrial Average was up 0.8%, or 170 points. The S&P 500 gained 0.3% while the Nasdaq gained 2.3%.
Tech stocks led the way on Thursday, with Amazon up 2.8% and Microsoft up 1.6%.
At a press conference on Thursday afternoon, President Trump said he would consider for companies who receive bailouts under his administration’s proposed $1 trillion stimulus plan.
Central banks are also continuing to act in order to cushion the economic blow of the coronavirus outbreak: yesterday, the European Central Bank announced an $818 billion bond-buying program and the Federal Reserve said it will act to shore up prime money market funds.
Crucial quote: “Central banks, particularly the Fed, really are playing whack-a-mole with the financial system,” Eric Winograd, senior economist at AllianceBernstein, told CNBC. “Every day, a new area of distress pops up and every day, they’re coming up with a new program or rebooting an old program.” The Federal Reserve is taking extraordinary steps to stabilize the U.S. economy: it has cut interest rates to almost zero, said it’s prepared to inject trillions of dollars into the overnight repo market, slashed bank reserve requirements and agreed to buy short term debt from companies with good credit ratings.
Big number: The price of oil bounced 24% on Thursday, gaining back about half of its losses from Wednesday, when it reached a multi-decade low. According to reporting in the Wall Street Journalciting people familiar with the matter, the Trump administration is considering intervening in the ongoing oil-price war between Saudi Arabia and Russia.
Key background: The Dow dropped 6.3% yesterday, nearly 2,000 points, while the S&P 500 was down 5.2% and the Nasdaq slid 4.7%. It was the eighth consecutive day where the S&P 500 swung more than 4% in either direction—that level of volatility is far worse than the previous record of six days during the Great Depression, according to LPL Financial. Last night, President Donald Trump signed a coronavirus relief bill into law. The bill includes free coronavirus testing and paid sick leave, among other measures.The Trump administration is also pushing for a $1 trillion economic stimulus package.
I’m an assistant editor on Forbes’ Money team, covering markets, fintech, and blockchain. I recently completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance and the Foreign Corrupt Practices Act.
Mandatory Credit: Photo by JAMES GOURLEY/EPA-EFE/Shutterstock (10584160h) A view of digital market boards at the Australian Stock Exchange (ASX) in Sydney, Australia, 16 March 2020. The ASX dropped more than 7 percent at the opening of trade as concerns over the coronavirus and COVID-19 pandemic grow. Australian Stock Exchange (ASX) drops at opening on coronavirus concerns, Sydney, Australia – 16 Mar 2020
(Bloomberg) — The stomach-turning ride on global financial markets took a dramatic turn Monday, with U.S. stocks plunging the most since 1987 after President Donald Trump warned the economic disruption from the virus could last into summer.
The S&P 500 sank 12%, extending losses as Trump said the economy could fall into a recessoin. Equities opened sharply lower after central bank stimulus around the world failed to mollify investors worried about the damage the coronavirus is inflicting on economies.
The negative superlatives for American stocks are piling up. The S&P wiped out its gain in 2019 and is now down almost 30% from its all-time high. The Dow Jones Industrial Average lost almost 13%, falling 3,000 points to close at at two-year low. The Russell 2000 had its worst day on record, losing more than 14%.
“This is different. The thing that is scarier about it is you’ve never been in a scenario where you shut down the entire economy,” said Steve Chiavarone, a portfolio manager with Federated Investors. “You get a sense in your stomach that we don’t know how to price this and that markets could fall more.”
While the Fed cut rates toward zero and stepped up bond buying, investors continued to clamor for a massive spending package to offset the pain from closures of schools, restaurants, cinemas and sporting events. Companies around the world have scaled back activity to accommodate government demands to limit social interaction.
Here are some of Monday’s key moves across major assets:
All 11 groups in the S&P 500 fell, with eight of them down at least 10%.
The Dow Jones Industrial Average’s tumble from its record reached 30%.
Brent crude dipped below $30 a barrel for the first time since 2016.
Treasury yields retreated across the curve with moves most pronounced on the short end.
Shares tumbled in Asia and Europe, where the continent is now reporting more new virus cases each day than China did at its peak as more countries lock down.
The yen surged, the Swiss franc rallied and the dollar fluctuated.
Gold failed again to capitalize on the rush to havens and reversed an earlier gain to tumble.
Bonds declined across most of Europe, where a measure of market stress hit levels not seen since the 2011-2012 euro crisis.
The Fed and other central banks have dramatically stepped up efforts to stabilize capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating global economic outlook. An International Monetary Fund pledge to mobilize its $1 trillion lending capacity also had little impact in markets.
The problem is, bad news keeps stacking up. The New York Fed’s regional gauge of factory activity plunged. Ryanair Holdings Plc said Monday it will ground most of its European aircraft while a consultant said the pandemic will bankrupt most airlines worldwide before June unless governments and the industry step in. Nike Inc. and Apple Inc. announced mass store closings.
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery,” Jason Daw, a strategist at Societe Generale SA in Singapore, wrote in a note. “However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks.”
The yen rebounded from Friday’s plunge after the Fed and five counterparts said they would deploy foreign-exchange swap lines. Australian equities fell almost 10%, the most since 1992, even after the Reserve Bank of Australia said it stood ready to buy bonds for the first time — an announcement that sent yields tumbling. New Zealand’s currency slumped after an emergency rate cut by the country’s central bank.
Meanwhile, China reported Monday that output and retail sales tumbled in the past two months.
These are the main moves in markets:
Stocks
The S&P 500 fell 11.98% as of 4 p.m. in New York.
The Dow Jones Industrial Average plunged 12.93%
The Stoxx Europe 600 Index lost 4.9%, paring a drop that reached 10%.
The MSCI Emerging Market Index declined 6.3%.
The MSCI Asia Pacific Index decreased 3.7%.
Currencies
The Bloomberg Dollar Spot Index rose 0.2%.
The euro gained 0.5% to $1.1162.
The Japanese yen strengthened 1.8% to 105.94 per dollar.
Bonds
The yield on two-year Treasuries sank 14 basis points to 0.35%.
The yield on 10-year Treasuries declined 22 basis points to 0.73%.
The yield on 30-year Treasuries declined 22 basis points to 1.31%.
Germany’s 10-year yield climbed seven basis points to -0.47%.
Commodities
West Texas Intermediate crude fell 9.2% to $29.05 a barrel.
Gold weakened 4.3% to $1,463.30 an ounce.
Iron ore sank 2.5% to $86.10 per metric ton.
—With assistance from Claire Ballentine, Elena Popina and Elizabeth Stanton.
The spread of information is fast, so whatever happens makes the stock market crash fast. People are selling in panic as the market might go down more. The fact is nobody knows what will happen. The only thing that works always is being prepared for anything, invest for the long-term and keep rational. Want to know more about my research and portfolios? Here is my independent stock market analysis and research! STOCK MARKET RESEARCH PLATFORM (analysis, stocks to buy, model portfolio) https://sven-carlin-research-platform… Sign up for the FREE Stock Market Investing Course – a comprehensive guide to investing discussing all that matters: https://sven-carlin-research-platform… I am also a book author: Modern Value Investing book: https://amzn.to/2lvfH3t Check my website to hear more about me, read my analyses and about OUR charity. (YouTube ad money is donated) http://www.svencarlin.com Listen to Modern Value Investing Podcast: https://svencarlin.com/podcasts/ I am also learning a lot by interning with my mentors: dr. Per Jenster and Peter Barklin at the Niche Masters fund. http://nichemastersfund.com#stockmarketcrash#market#stocks
In 2008 the S&P fell half off its peak and nothing physical happened to the economy. Now we have two very physical things — supply and demand shocks. The strategy of no strategy means these two physical problems will continue until a vaccine is produced, i.e. likely not for a year or more.
On February 25th, I predicted a massive drop in the stock market due to the coronavirus. At that point it had already fallen 8% from its peak. Today, it’s 20% below its peak. I think it will fall 50% below peak.
That may be conservative. In the Great Recession, the S&P fell half from its peak and nothing physical happened to the economy. Now we have two very physical things — what economists call supply and demand shocks — happening. A growing share of the labor force is not going to work and a growing share of consumers are shunning retail outlets and all other manner of service establishments for fear of getting infected.
Let me give you my partial list of the businesses that I think will go under. I think restaurants will fail. I think coffee shops will fail. I think dry cleaners will fail. I think airlines will fail. I think cruise boat companies will fail. I think hotels will fail. I think department and boutique clothing and other retail stores will fail. I think travel agencies will fail. I think movie theaters will fail. I think universities and colleges will fail. I think theaters will fail. I think theme parks will fail. I think spas will fail. I think resorts will fail. I think convention centers will fail. I think malls will fail. I think gyms will fail. I think orchestras will fail. I think hair salons will fail. I think nail salons will fail. I think barber shops will fail. I think bars will fail. I think every business that’s not online and involves customers will fail.
What share will fail?
Ten percent is optimistic.
Let me justify my view. Containing the coronavirus requires two months at a minimum. Why two months? This is the time it’s taken China to bring new infections down to single digits. Even so, China has not lifted the lockdown of Hubei Province. Indeed, every city you enter in China is now requiring a two-week period of quarantine. China is enforcing this with technology and people. You enter into Shanghai and you’re asked where you are staying. Once you get there, the neighborhood officials, who have been electronically notified of your arrival, check on you daily to make sure you are staying inside.
What happens when China’s new infection rate goes to zero? Will it lift its restrictions? Hard to say. If I’m President Xi and have gone to such lengths to eliminate the problem, I don’t want to run the risk that someone has a four-week incubation period or has slipped across the border carrying the virus and all hell breaks out again. In short, it may be a long time before China returns to something close to normal. Even then, foreigners arriving in China will surely need to spend two weeks in confinement before being let loose on the streets.
We don’t know China’s end game. But we’re pretty sure it has one. The US has no end game. Yes, the president has finally gotten serious about bringing testing on line. But it can take two weeks for infected people to show symptoms. Indeed, 1% will first show symptoms after two weeks. Suppose Joe Blow contracts the virus today. Say ten days later he starts feeling symptoms but he waits another five days to get tested. Then it takes two days to get results at which point he self quarantines or heads to the hospital. Now he’s had 17 days to infect a motherload of people either directly or indirectly. Maybe Joe works in a nursing home. We’ve seen the damage one person with coronavirus can do to a nursing home. The Life Care Center in Kirkland, Washington had 120 residents. In recent weeks, 26 have died. Another 24 are definitely infected. And many of the Center’s staff have symptoms, but, as of two days ago, have yet to be tested.
Okay, back to Joe. He gets tested on day 15. But on day 14 he infects Jane Doe who also takes 15 days before going into quarantine, but infects Jack, Jill, and Sandy on day 14. You see where I’m going. Our voluntary (we or our docs decide) testing system does nothing to keep the coronavirus infection from rolling along for months if not years.
Here’s a policy that would actually save lives and the economy. Quarantine the entire country for two weeks. Italy is doing this, although no one knows its duration. At the end of two weeks, test everyone — all 327.2 million people plus any visitors and continue testing everyone once a week for months. Anyone who tested positive would, of course, be quarantined or hospitalized. We would also reopen the borders, but test everyone coming into the country. This is a policy that would a) stop the spread of the infection in its tracks and b) limit the renewed spread of the infection once the quarantine is lifted.
Could we produce hundreds of millions of tests? Yes. During WWII, we built cargo ships in four days. Can we put everyone under quarantine for two weeks? Yes, the president has this authority. Can we require weekly testing. Again, the answer is yes.
Will our president do this? Clearly not. According to him, the “foreign” virus is going to disappear on its own and in short order. President Trump is, himself, possibly infected by way of an aide to Brazil’s president. But, thus far, he has chosen not to get tested. In the meantime, he may have infected or be infecting his top aides as well as his family. And members of his administration may have infected or be infecting much, if not most of Congress. Beyond jeopardizing so many people, the president is setting the worst possible example.
The strategy of no strategy means the two physical problems hammering the economy will continue until a vaccine is produced, i.e. likely not for a year or more. How many retail and service establishments can survive that long without customers, while retaining their employees? Not many. Hence, we can expect a massive wave of layoffs and bankruptcies starting next week.
There are two other reasons to expect a 50% from peak decline in the stock market. First, the market was perceived by many to be overpriced to begin with. Second, corporate America is dramatically over leveraged. To quote the Fed, “The ratio of debt to assets for all publicly traded non-financial companies has hit its highest level in two decades, and the leverage ratio among debt-heavy firms is near a historical high.” The higher the leverage ratio, the larger the percentage decline in stock values for a given percentage reduction in profits.
Moreover, over half of corporate debt is rated BBB compared to roughly 25% in 2008. This means that a large share of corporate America faces solvency risk. Here’s the BBB rating description: “A BBB rating reflects an opinion that the issuer has the current capacity to meet its debt obligations but faces more solvency risk.”
There’s more, but you get the picture. I hope I’m wrong, but I fear an even bigger drop in the market is coming.
I am a professor of economics at Boston University, a Fellow of the American Academy, a Research Associate of the NBER, and President of Economic Security Planning, Inc. — a company that markets personal financial planning tools at maxifi.com, maximizemysocialsecurity.com, analyzemydivorccesettlement.com, and economicsecurityplanning.com. Recent books: Get What’s Yours – The Secrets to Maxing Out Your Social Security Benefits (a NY Times Best Seller with Phil Moeller and Paul Solman), The Economic Consequences of the Vickers Commission, The Clash of Generations (with Scott Burns), Jimmy Stewart Is Dead, and Spend ‘Til the End. Follow me on twitter @kotlikoff, Circle me on Google , check out my website, kotlikoff.net, and ask me Social Security questions by clicking Ask Larry at the bottom of http://www.maximizemysocialsecurity.com.
Traders say the large swings are being driven by expected interest rate hikes, political uncertainty in Washington and automatic trading set off by computers. » Subscribe to NBC News: http://nbcnews.to/SubscribeToNBC » Watch more NBC video: http://bit.ly/MoreNBCNews NBC News is a leading source of global news and information. Here you will find clips from NBC Nightly News, Meet The Press, and original digital videos. Subscribe to our channel for news stories, technology, politics, health, entertainment, science, business, and exclusive NBC investigations. Connect with NBC News Online! Visit NBCNews.Com: http://nbcnews.to/ReadNBC Find NBC News on Facebook: http://nbcnews.to/LikeNBC Follow NBC News on Twitter: http://nbcnews.to/FollowNBC Follow NBC News on Google+: http://nbcnews.to/PlusNBC Follow NBC News on Instagram: http://nbcnews.to/InstaNBC Follow NBC News on Pinterest: http://nbcnews.to/PinNBC
Topline: A surprise price war between oil producers Saudi Arabia and Russia, compounded by intense investor anxiety over the continued spread of the coronavirus, triggered massive market losses on Monday.
The Dow Jones Industrial Average lost 7.8%, or 2,014 points, the S&P 500 lost 7.6%, and the Nasdaq Composite lost 7.3%.
Early losses of 7% for the S&P 500 triggered the market’s circuit breaker mechanism, which halts trading for 15 minutes to prevent stocks from free-falling and give investors a chance to reassess.
The yield on the 10-Year U.S. Treasury bond plummeted to below 0.4%, signaling that investors are continuing to flee risky assets like stocks in favor of safer ones like bonds and gold.
Oil prices plummeted by more 20% during the day, seeing their worst drop since the Gulf War in 1991; the financial services sector also suffered, with shares of JPMorgan down nearly 13% and the Financial Select Sector ETF falling 10%.
Shares of Clorox hit a new 52-week high of $177 per share on Monday as investors flocked to the producer of cleaning products and disinfectants.
Key background: Over the weekend, Saudi Arabia—the world’s largest oil exporter—slashed its prices to levels not seen in 30 years after it could not convince Russia to agree to production cuts. The 14 members of OPEC (the Organization of the Petroleum Exporting Countries) along with some non-members, including Russia, met last week to discuss how to respond to the lagging demand caused by the spreading coronavirus. After negotiations fell apart, Saudi Aramco, the Saudi state-owned oil company, said it will offer major discounts in order to win over buyers. It’s planning to boost production to more than 10 million barrels a day and has even told some market participants that it could raise production to a record 12 million barrels a day, Bloomberg reports. Oil prices had lost more than 30% by Monday morning in response to the sudden supply shock.
Tangent: Shares of the world’s largest oil producers like BP and Royal Dutch Shell plummeted alongside global markets on Monday. Shares of BP dropped 19.2% to $25.25 on Monday— that translates to more than $20 billion in lost market value since the close of markets on Friday, and Royal Dutch Shell dropped 15.2% to $18.00 per share—that’s $25 billion in value lost.
Chief critic: President Donald Trump weighed in on Twitter about the market’s drop on Monday morning, writing, “Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News, is the reason for the market drop!”
I’m an assistant editor on Forbes’ Money team, covering markets, fintech, and blockchain. I recently completed my master’s degree in business and economic reporting at
John Kilduff, CNBC contributor specializing in energy trading, talks with Rachel Maddow about the dynamic between Saudi Arabia and Russia that has caused the price of oil to drop precipitously and clobbered a stock market already crippled by coronavirus concerns. Aired on 3/9/2020. » Subscribe to MSNBC: http://on.msnbc.com/SubscribeTomsnbc MSNBC delivers breaking news, in-depth analysis of politics headlines, as well as commentary and informed perspectives. Find video clips and segments from The Rachel Maddow Show, Morning Joe, Meet the Press Daily, The Beat with Ari Melber, Deadline: White House with Nicolle Wallace, Hardball, All In, Last Word, 11th Hour, and more. Connect with MSNBC Online Visit msnbc.com: http://on.msnbc.com/Readmsnbc Subscribe to MSNBC Newsletter: http://MSNBC.com/NewslettersYouTube Find MSNBC on Facebook: http://on.msnbc.com/Likemsnbc Follow MSNBC on Twitter: http://on.msnbc.com/Followmsnbc Follow MSNBC on Instagram: http://on.msnbc.com/Instamsnbc Saudi Arabia Seizes Oil Market By The Throat; Stock Market Shokes | Rachel Maddow | MSNBC
Topline: Global stocks plunged after crude oil posted its biggest fall since the 1991 Gulf War after Saudi Arabia launched a price war with Russia.
Japan’s Nikkei index fell more than 5% on Monday, while stocks in Hong Kong and mainland China were also down as panicked investors in Asia flocked to safe-haven assets like government bonds and the Japanese yen.
European stocks followed suit, with London’s FTSE 100 index down almost 8% on Monday morning, France’s CAC 40 more than 7% and Germany’s DAX 6%.
The pan-European Euro Stoxx 50, measuring the Continent’s 50 largest companies, plunged more than 6% on Monday morning, its worst performance in more than a year.
U.S. futures were sharply down, with S&P 500 futures down more than 5%.
Oil prices plummeted with the benchmark Brent crude down to $33.20 a barrel, while West Texas Intermediate fell 31%, to $28.32 a barrel on Sunday.
The steep drop was triggered after Saudi Arabia announced it would raise production after OPEC’s deal with Russia to supply collapsed on Friday.
Big number: Some $90 billion ($140 billion AUD) was wiped off Australia’s markets on Monday, with the benchmark ASX falling more than 7%—its worst performance since the global financial crash.
What to watch for: Oil prices could drop to a low of $20 a barrel, Goldman Sachs analysts warned on Sunday, if the coronavirus continues to spread and the oil price war intensifies.
Key background: Global markets have posted some of their steepest falls since the 2008-2011 financial crisis with panicked moves from investors spooked by the potential impact of the coronavirus on the global economy, and an oil price war. The Federal Reserve’s emergency rate on March 3, 2020, provided a momentary confidence boost for the markets, which now will look for coordinated action from the G7 club of advanced economies to underpin the global economy.
Tangent: Some 110,000 people globally have been infected with Covid-19 to date, but as of Monday the number of new cases in China, where the pneumonia-like virus was detected, appear to be falling, while cases around the world continue to prompt strict quarantine measures, particularly in Italy, now the largest cluster of Covid-19-related deaths outside China.
I am a breaking news reporter for Forbes in London, covering Europe and the U.S. Previously I was a news reporter for HuffPost UK, the Press Association and a night reporter at the Guardian. I studied Social Anthropology at the London School of Economics, where I was a writer and editor for one of the university’s global affairs magazines, the London Globalist. That led me to Goldsmiths, University of London, where I completed my M.A. in Journalism. Got a story? Get in touch at isabel.togoh@forbes.com, or follow me on Twitter @bissieness. I look forward to hearing from you.
The economic consequences of the coronavirus epidemic have sparked a conflict among major oil-producing nations. Last week, oil producers were unable to agree on a reduction in production volumes, resulting in a price war between OPEC and Russia. That has sent oil prices plummeting. The price of oil collapsed by 31.5 percent at the start of trading, the lowest price since January 1991. As a reaction, stock markets fell sharply this Monday: In Tokyo, the Nikkei Index lost more than 5 percent, while the Hang Seng in Hong Kong fell almost 4 percent. Australia’s ASX Index fell particularly hard with a minus of 7.3 percent and in Germany, the DAX tumbled almost 8 percent at the start of trading. The picture around the Gulf is even more dramatic – markets have shed up to around 10% there. Subscribe: https://www.youtube.com/user/deutsche… For more news go to: http://www.dw.com/en/ Follow DW on social media: ►Facebook: https://www.facebook.com/deutschewell… ►Twitter: https://twitter.com/dwnews ►Instagram: https://www.instagram.com/dw_stories/ Für Videos in deutscher Sprache besuchen Sie: https://www.youtube.com/channel/deuts…#Coronavirus#StockMarket#Economy
Specialist Erica Fredrickson works with a colleague on the floor of the New York Stock Exchange, Monday, Feb. 24, 2020. Stocks are opening sharply lower on Wall Street, pushing the Dow Jones Industrial Average down more than 700 points, as virus cases spread beyond China, threatening to disrupt the global economy. (AP Photo/Richard Drew)
The Dow Jones Industrial Average slumped more than 1,000 points Monday in the worst day for the stock market in two years as investors worry that the spread of a viral outbreak that began in China will weaken global economic growth.
Traders sought safety in U.S. government bonds, gold and high-dividend stocks like utilities and real estate. The yield on the 10-year Treasury fell to the lowest level in more than three years.
Technology stocks accounted for much of the broad market slide, which wiped out all of the Dow’s and S&P 500’s gains for the year.
More than 79,000 people worldwide have been infected by the new coronavirus. China, where the virus originated, still has the majority of cases and deaths. The rapid spread to other countries is raising anxiety about the threat the outbreak poses to the global economy.
“Stock markets around the world are beginning to price in what bond markets have been telling us for weeks – that global growth is likely to be impacted in a meaningful way due to fears of the coronavirus,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The Dow lost 1,031.61 points, or 3.6%, to 27,960.80. At its low point, it was down 1,079 points.
The S&P 500 index skidded 111.86 points, or 3.4%, to 3,225.89. The Nasdaq dropped 355.31 points, or 3.7%, to 9,221.28 – it’s biggest loss since December 2018.
The Russell 2000 index of smaller company stocks gave up 50.50 points, or 3%, to 1,628.10.
Investors looking for safe harbors bid up prices for U.S. government bonds and gold. The yield on the 10-year Treasury note fell sharply, to 1.37% from 1.47% late Friday. It was at 1.90% at the start of the year. Gold prices jumped 1.7%.
Crude oil prices slid 3.7%. Aside from air travel, the virus poses an economic threat to global shipping.
Benchmark crude oil fell $1.95 to settle at $51.43 a barrel. Brent crude oil, the international standard, dropped $2.20 to close at $56.30 a barrel.
The slump in U.S. indexes followed a sell-off in markets overseas as a surge in cases of the disease in South Korea and Europe rattled investors.
Germany’s DAX slid 4% and Italy’s benchmark index dropped 5.4%. South Korea’s Kospi shed 3.9% and markets in Asia fell broadly.
South Korea is now on its highest alert for infectious diseases after cases there spiked. Italy reported a sharp rise in cases and a dozen towns in the northern, more industrial part of that country are under quarantine. The nation now has the biggest outbreak in Europe, prompting officials to cancel Venice’s famed Carnival, along with soccer matches and other public gatherings.
There are also more cases of the virus being reported in the Middle East as it spreads to Iran, Iraq, and Kuwait, among others.
The viral outbreak threatens to crimp global economic growth and hurt profits and revenue for a wide range of businesses. Companies from technology giant Apple to athletic gear maker Nike have already warned about a hit to their bottom lines. Airlines and other companies that depend on travelers are facing pain from cancelled plans and shuttered locations.
Technology companies were among the worst hit by the sell-off. Apple, which depends on China for a lot of business, slid 4.8%. Microsoft dropped 4.3%. Banks were also big losers. JPMorgan Chase fell 2.7% and Bank of America slid 4.7%.
Airlines and cruise ship operators also slumped. American Airlines lost 8.5%, Delta Air Lines dropped 6.3%, Carnival skidded 9.4% and Royal Caribbean Cruises tumbled 9%.
Gilead Sciences climbed 4.6% and was among the few bright spots. The biotechnology company is testing a potential drug to treat the new coronavirus. Bleach-maker Clorox was also a standout, rising 1.5%.
Utilities and real estate companies held up better than most sectors. Investors tend to favor those industries, which carry high dividends and hold up relatively well during periods of turmoil, when they’re feeling fearful.
The rotation into defensive sectors has made utilities and real estate the biggest gainers this year, while technology stocks have lost ground.
“The yields have been moving lower all year, so that’s providing a tail wind for utilities, for real estate,” said Willie Delwiche, investment strategist at Baird. “In the face of this heightened uncertainty, especially if it’s centered overseas, tech is going to bear some of the brunt of that because it’s been so popular, because it’s done so well, and because it has so much exposure to Asia.”
In the eyes of some analysts, Monday’s tank job for stocks means they’re just catching up to the bond market, where fear has been dominant for months.
U.S. government bonds are seen as some of the safest possible investments, and investors have been piling into them throughout 2020, even as stocks overcame stumbles to set more record highs. The 10-year yield on Monday was near its intraday record low of 1.325% set in July 2016, according to Tradeweb. The 30-year Treasury yield fell further after setting its own record low, down to 1.83% from 1.92% late Friday.
Traders are increasingly certain that the Federal Reserve will cut interest rates at least once in 2020 to help prop up the economy. They’re pricing in a nearly 95% probability of a cut this year, according to CME Group. A month ago, they saw only a 68% probability.
Of course, some analysts say stocks have been rising in recent weeks precisely because of the drop in yields. Bonds are offering less in interest after the Federal Reserve lowered rates three times last year — the first such cuts in more than a decade — and amid low inflation. When bonds are paying such meager amounts, many investors say there’s little real competition other than stocks for their money.
The view has become so hardened that “There Is No Alternative,” or TINA, has become a popular acronym on Wall Street. Even with Monday’s sharp drops, the S&P 500 is still within 4.2% of its record set earlier this month.
In other commodities trading Monday, wholesale gasoline fell 4 cents to $1.61 per gallon, heating oil declined 8 cents to $1.61 per gallon and natural gas fell 8 cents to $1.83 per 1,000 cubic feet.
Gold rose $27.80 to $1,672.40 per ounce, silver rose 35 cents to $18.87 per ounce and copper fell 3 cents to $2.59 per pound. The dollar fell to 110.74 Japanese yen from 111.62 yen on Friday. The euro weakened to $1.0842 from $1.0858.
All three major stock market indexes plummeted Monday amid fears of rising inflation and increased interest rates. At its lowest point, the Dow fell 1,600 points and closed down 1,100 points. It was the largest one-day point loss in the market’s history. CBS News business analyst Jill Schlesinger joins CBSN to explain what is affecting the markets.
BEIJING (AP) — Global stock markets followed Wall Street lower Friday after a spike in new virus cases in South Korea refueled investor anxiety about China’s disease outbreak.
Benchmarks in Tokyo, Hong Kong and Sydney retreated and London and Frankfurt opened lower. Shanghai advanced.
Traders shifted money into bonds and gold, a traditional safe haven.
Bond markets are “sounding a warning on global growth” as virus fears spread to South Korea, Singapore and other economies, DBS analysts said in a report.
Markets had been gaining on hopes the outbreak that began in central China might be under control following government controls that shut down much of the world’s second-largest economy. Sentiment was buoyed by stronger-than-expected U.S. economic data and rate cuts by China and other Asian central banks to blunt the economic impact.
But investors were jarred by South Korea’s report of 52 new cases of the coronavirus, raising its total to 156, most of them since Wednesday. That renewed concern the infection is spreading in South Korea, Singapore and other Asian economies.
In early trading, the FTSE 100 in London sank 0.5% to 7,402.58 and Frankfurt’s DAX lost 0.4% to 13,606.41. France’s CAC 40 tumbled 0.6% to 6,019.63.
On Wall Street, the future for the benchmark S&P 500 index retreated 0.4% and that for the Dow Jones Industrial Average lost 0.5%.
In Asia, Tokyo’s Nikkei 225 declined 0.4% to 23,386.74 and Hong Kong’s Hang Seng sank 1.1% to 27,308.81. In Seoul, the Kospi lost 1.5% to 2,162.84.
The Shanghai Composite Index bucked the regional trend, climbing 0.3% to 3,039.67.
The S&P-ASX 200 in Sydney lost 0.3% to 7,139.00. New Zealand advanced while Southeast Asian markets declined.
On Thursday, the S&P 500 index lost 0.4% after being down as much as 1.3% at one point. The Dow fell 0.4%.
Gold touched its highest price since early 2013, gaining $14.50 to $1.634.30. The 10-year Treasury’s yield sank to 1.49% from 1.57% late Wednesday.
Yields on 30-year U.S. Treasuries are below 2%, a level last seen in September “when U.S.-China trade fears were acute,” said the DBS analysts.
A pickup in economic activity “is still elusive,” despite a decline in numbers of new Chinese cases, they wrote.
China reported 118 deaths and 889 new cases in the 24 hours through midnight Thursday.
That raised the death toll to 2,236 since December and total cases to 75,465.
The number of new cases reported each day has been declining but changes in how Chinese authorities count infections have raised doubts about the true trajectory of the epidemic.
The Korea Centers for Disease Control and Prevention said 41 of the new 52 cases were in the southeastern city of Daegu and the surrounding region.
South Korea’s government declared the area a “special management zone” Friday. The mayor of Daegu urged the city’s 2.5 million people to stay home and wear masks even indoors if possible.
Also Friday, a measure of Japan’s manufacturing activity tumbled to an eight-year low and a companion gauge of service industries dropped even more sharply.
The preliminary purchasing managers’ index for February declined to 47.7 from the previous month’s 48.8 on a 100-point scale on which numbers below 50 show activity contracting. The preliminary services PMI plunged to 46.4 from January’s 51.0.
The decline “underlines that the coronavirus has started to weaken activity,” Marcel Thieliant of Capital Economics said in a report.
To contain the disease, China starting in late January cut off most access to Wuhan, the central city where the first cases occurred, and extended the Lunar New Year holiday to keep factories and offices closed and workers at home.
Some Chinese factories and other businesses are reopening but restrictions that in some areas allow only one member of a household out each day still are in place. Forecasters say auto manufacturing and other industries won’t return to normal until at least mid-March.
A rise in new cases in Beijing, the capital, “raises alarm” because it suggests major Chinese cities “may be under pressure to contain the virus amidst returning workers” as companies reopen, Mizuho Bank said in a report.
A growing number of companies say they expect to suffer losses due to the virus.
The world’s largest shipping company, Denmark’s A.P. Moller Maersk, said Thursday it expects a weak start to the year. Air France said the disease could mean a hit of up to 200 million euros ($220 million) for its results from February to April.
The worries overshadowed encouraging data on the U.S. economy.
A survey of manufacturers in the mid-Atlantic region jumped to its highest level since February 2017. A separate report showed leading economic indicators in the United States rose more in January than economists forecast. The number of workers applying for jobless claims rose but stayed low.
ENERGY: Benchmark U.S. crude lost 75 cents to $53.13 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 49 cents on Thursday to settle at $53.78. Brent crude oil, the international standard, lost 90 cents to $58.41 per barrel in London. It rose 19 cents the previous session to $59.31 per barrel.
CURRENCY: The dollar declined to 111.72 yen from Thursday’s 112.09 yen. The euro rose to $1.0815 from $1.0790.
Subscribe: http://bit.ly/SubscribeTDAmeritrade The COVID-19 coronavirus has broken out in China. Tens of thousands have been infected, and more than a thousand have died. Airlines have canceled flights and shops have closed, but the virus is also impacting global financial markets in ways you might not expect. We dig deeper to find other ways the COVID-19 coronavirus may impact markets and considerations for hedging risk. TD Ameritrade is where smart investors get smarter. We post educational videos that bring investing and finance topics back down to earth weekly. Have a question or topic suggestion? Let us know. Connect with TD Ameritrade: Facebook: http://bit.ly/TDAmeritradeFacebook Twitter: http://bit.ly/TwitterTDAmeritrade Open an account with TD Ameritrade: http://bit.ly/SignUpTDAmeritrade
Topline: Private equity giant Kohlberg Kravis Roberts & Co. (KKR) disclosed in a filing Friday that it now owns a 10.7% stake in U.S. restaurant chain Dave & Busters, and plans to continue discussions with management as it pushes for changes to the business.
Dave & Buster’s (PLAY) stock surged up to 16% on the news Friday, reaching almost $49, its highest level since June 2019. Shares are currently up 12% for the day while KKR stock increased 2.5%.
The firm took a rare activist step in disclosing its stake, saying that it has held discussions with Dave & Buster’s management and board as it pushes for changes, though its filing did not include any specific plans or proposals for the company.
KKR, which previously reported a 2.65% stake in Dave & Buster’s last September, also disclosed that it may discuss “any extraordinary corporate transaction” with management and shareholders, including a merger or a change in the board.
KKR reportedly has a “good relationship” with Dave & Buster’s management and the two sides have had a “constructive dialogue,” a source told Axios, while also confirming that KKR isn’t internally talking about attempting a hostile takeover.
Crucial statistics: Wall Street analysts are largely bullish on Dave & Buster’s: It has nine “buy” ratings, four “hold” ratings and zero “sell” ratings, according to Bloomberg data.
Key background: The Dallas-based company, which first opened in 1982, has over 110 locations. Shares of Dave & Buster’s fell 7.5% overall in 2019, while the S&P 500 rose 30%. The company suffered a one-day drop of 20% in June when it reported a surprising decline in quarterly sales that severely rattled investor confidence in the retailer. Facing headwinds like higher wage costs and restaurant oversupply in what is an increasingly competitive industry, Dave & Busters said earlier this week that its comparable store sales would decline between 2.5% to 3% for fiscal year 2019.
Crucial quote: “Based on our review of past engagements, we believe the KKR Fund may undertake a traditional activist campaign and seek to gain board representation if the firm is unable to make progress working directly with management to improve performance,” Stifel analyst Christopher O’Cull said in a note on Friday. He previously predicted that a leveraged buyout of Dave & Buster’s would be possible for around $50 per share, but that the company will be taken private at a significant premium.
Tangent: Raymond James analyst Brian Vaccaro also forecasts a possible leveraged buyout scenario, where KKR, which has steadily increased its stake in Dave & Buster’s since the third quarter of 2019, would pay a price of $55-per share for the company.
I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com
With Trump’s Phase 1 trade deal with China now complete after a lengthy signing ceremony on Wednesday cheered on by Wall Street luminaries such as Blackstone cofounder Stephen Schwarzman, hedge funders Ken Griffin and Nelson Peltz, and Mary Callahan Erdoes of JPMorgan, investors now have a new reason to try and play growth in the country. Record earnings released by investment bank Morgan Stanley the morning after trade negotiations wrapped up reveal the profits that can be made by smartly investing in the world’s second-largest economy.
Morgan Stanley’s fourth-quarter earnings revealed strength across the firm. Revenues surged 27%, propelled by growth across important divisions such as trading, underwriting and wealth management. Overall, Morgan Stanley posted $10.8 billion in revenues for the quarter and $2.2 billion in profits, and for the full year, the investment bank generated a record $41.4 billion in revenue and a $9 billion profit, underscoring the success CEO James Gorman has had in managing its vaunted investment bank, building up its wealth management operations and refitting its trading desks to boost profits.
One line item in the results, however, uncovered a new story for Wall Street watchers to follow. Morgan Stanley’s investment management division booked an almost unprecedented investment windfall in Asia, which reflects the potential China and the rest of the region holds to both the firm and its Wall Street peers in banking and private equity.
In 2013, Morgan Stanley’s Asian private equity division helped take Chinese baby-milk producer Feihe International private, working with the company’s controlling family, led by CEO Leng Youbin. The company, founded in 1962, had listed American Depositary receipt shares on the New York Stock Exchange in 2008. After generally languishing in the wake of the listing, shareholders like Youbin and his family trusts looked to privatize the business, working Morgan Stanley’s Asian private equity arm on a $147 million deal to buy out the public shares listed on the NYSE. Morgan Stanley contributed $28.1 million of equity on behalf of its limited partners, Feihe’s CEO ponied up a further $8 million, and the consortium raised $50 million in debt financing from Wing Lung Bank Limited and Cathay United Bank to get the deal done.
This past fall, they re-listed Feihe, now the leading baby-milk seller in China, by selling 893 million shares in Hong Kong and raising about $900 million to pay down debt and make acquisitions. Since the listing, China Feihe’s shares have skyrocketed from about HK$7.5 to KK$10.98, per Sentieo data, as investors gained interest in its 15% market baby formula share and revenues and profits of $1.5 billion and $317 million, respectively.
For the participants, the 2013 deal has turned into one of the big windfalls of this era. The Leng family’s shares are now worth $5.2 billion according to Forbes calculations and Morgan Stanley’s shares are worth some $2.3 billion. When Morgan Stanley released full-year earnings, the deal even moved the needle for the 60,000 worker investment bank.
The firm’s investment management division saw revenues more than double to $1.4 billion, led by $670 million in quarterly investment revenue versus $82 million in the year prior. Of the windfall, Morgan Stanley said its investment revenues “increased from a year ago on accrued carried interest related to an underlying investment’s initial public offering, subject to sales restrictions, within an Asia private equity fund managed on behalf of clients.” The carry and gains appear have boosted the firm’s overall earnings by at least 15% for the quarter. Typically half of private equity investment fee revenue will go back to employees in the form of earned carried interest.
On a conference call with analysts, CFO Jonathan Pruzan elaborated about China Feihe, “The company has been quite successful and grown quite nicely. … To give you some sort of context around the round numbers, the investment that we made was less than $50 million, and the current investment value is approximately $2 billion.” (Morgan Stanley declined to comment further.)
China is the preeminent driver of wealth in the world. When Forbes released its 2019 list of China’s wealthiest people, reporters uncovered 60 new billionaires in the country, many of whom are building businesses domestically that may one day resemble companies like Procter & Gamble, Starbucks, Pfizer and Nike. Wall Street has to pay attention, especially with domestic markets richly valued after a decade-long bull run.
For years, dealmakers like Blackstone’s Schwarzman, JPMorgan’s Jamie Dimon and Blackrock’s Larry Fink have been studying ways to build their presence in the region and either bank, partner or invest on behalf of the country’s growing business elite. While groundwork is mostly still just being laid, deals like Morgan Stanley’s recent coup underscore the potential remaining in China.
The Phase 1 trade deal signed on Wednesday signaled China’s intention to continue opening its financial system to foreign banks and investors. Vice premier Liu He, carrying a note from premier Xi Jinping, said at the Phase 1 signing China is transitioning from a high-growth economy to one more focused on quality increases. Presumably, that pertains to consumption, financial products and markets, and the capitalization of corporation. Some new developments reached in the deal appeared to make headway for U.S. firms excited about this potential.
The deal further opened Chinese markets to U.S. credit rating agencies, distressed debt investors and foreign financial firms seeking to fully own and manage subsidiaries in the region. Bankers have long wanted to own subsidiaries in the region and mostly unwound joint ventures that helped build China’s state-owned banking giants like ICBC.
In fact, a good way to gauge whether the Phase 1 trade agreement did in fact make substantial inroads, will be to watch how the largest U.S. financial firms respond. New action from the likes of JPMorgan’s Jamie Dimon and Blackstone’s Schwarzman would signal the effectiveness of Wednesday’s deal.
I’m a staff writer at Forbes, where I cover finance and investing. My beat includes hedge funds, private equity, fintech, mutual funds, M&A and banks. I’m a graduate of Middlebury College and the Columbia University Graduate School of Journalism, and I’ve worked at TheStreet and Businessweek. Before becoming a financial scribe, I was a part of the fateful 2008 analyst class at Lehman Brothers. Email thoughts and tips to agara@forbes.com. Follow me on Twitter at @antoinegara
For more than two years, Facebook has found itself at the center of a string of controversies, from privacy and data concerns to accusations of democracy-destroying behavior and antitrust investigations from the Federal Trade Commission. CEO Mark Zuckerberg has been called to testify in Washington not once but twice over his company’s policies. For most companies, a string of shaky headlines might affect the company’s outlook.
For Facebook, the company’s stock continues to rise.
After climbing over 50% last year, Facebook’s stock is already up over 5% so far in 2020. Despite a number of looming investigations from U.S. government agencies over competition and antitrust issues, the stock has hit several new all-time highs in recent weeks. The company saw its market cap rise by more than $200 billion in 2019, and is now worth nearly $630 billion today.
Facebook appears to be making a comeback from its historic slump in mid-2018, when the company unexpectedly warned of slower user and sales growth. A day after that announcement, the stock plunged 20%. The forecast of slowing profits also came amid wider concerns over data privacy. Facebook for months faced backlash over its handling of users’ privacy, as well as its role in not stopping the spread of “fake news.” Among mounting criticism, Facebook was lambasted for damaging democracy after British consulting firm Cambridge Analytica was able to leverage personal user data from millions for its political advertising strategies.The criticism caused Facebook stock to undergo an extended sell-off during the rest of 2018, where it lost nearly half of its overall market value.
The stock largely recovered in the first half of 2019, but plunged again nearly 10% in May, amid calls for the company’s breakup. The Federal Trade Commission then opened an antitrust probe into the social media giant in June, with many Wall Street analysts predicting that growing calls for regulation would be damaging for the company. Facebook was eventually slapped with a $5 billion fine from the FTC, its largest penalty in history, for violating consumers’ privacy.
Facebook also faced criticism over the launch of its new digital currency, Libra, last year. And as the 2020 U.S. election draws nearer, the world’s largest social media network is under intense pressure to adjust its policies on fake news and political advertising. But Facebook recently confirmed that it won’t change its policy of allowing false political advertisements on its platform. That contrasts with other social media companies, like Twitter, which banned all political ads from its site last October. What’s more, last September, 47 state attorneys general announced an investigation into Facebook for antitrust violations, sending the stock down 4%.
Despite the recent criticism and increased calls for regulation looming on the horizon, Facebook stock’s recent momentum and new record highs may signal that investors are so far unconcerned by the regulatory fears. Indeed, Wall Street is predicting a big year ahead for Facebook.
Facebook for months faced criticism and backlash over its handling of users’ privacy, as well as its role in the spread of fake news.
The company has in recent quarters continued to grow revenue by adding news users to its core platform as well as to its family of apps, like Instagram, Messenger and WhatsApp. Optimism is reportedly growing over Facebook’s ability to monetize those apps, like they have been with Instagram through video ads and commerce.
The stock’s most recent rally came on the back of stronger-than-expected earnings in the third quarter. Revenue growth actually accelerated in 2019, with the company reporting a year-over-year revenue growth rate of 26% in the first quarter, 28% in the second quarter and 29% in the third quarter. Even as Facebook tries to improve its reputation, it continues to dominate the digital advertising market: Businesses continue to use Facebook’s advertising platform, with analysts on average expecting its revenue from ads to increase 26% in 2019, according to Refinitiv.
In a recent note, Deutsche Bank analysts predicted “renewed strength in the core Facebook app” in 2020, thanks to company initiatives like reworking the core Newsfeed, rolling out Stories, scaling Marketplace and building its Groups product. Bank of America analysts, on the other hand, recently argued that Facebook’s Messenger and WhatsApp offerings are still undervalued and not fully reflected in the stock price, which they think can rise 20% higher. “While the firm remains under scrutiny and faces regulatory risks, it continues to execute exceptionally well,” writes Morningstar analyst Ali Mogharabi in his analysis of Facebook’s latest earnings report.
Even as Facebook tries to improve its reputation, it continues to dominate the digital advertising market.
Despite facing another year of criticism for allowing fake news on Facebook, Zuckerberg said in an annual blog post that “One of the big questions for the next decade is: how should we govern the large new digital communities that the internet has enabled?” The Facebook CEO, who is now worth almost $82 billion according to Forbes’ estimates, suggested that the best way to address this would be “by establishing new ways for communities to govern themselves.”
Since Trump’s inauguration day, Zuckerberg’s net worth has increased by an estimated $27.8 billion—the fifth-most of anyone in the world and the third-most of any American over that period, according to Forbes’ calculations.
Facebook’s fourth-quarter earnings and full-year results for 2019, which will be reported after the market closes on January 29, are a key indicator of whether the company can continue its momentum in 2020. But if 2019 was anything to go by, turbulent political times for Facebook may not have much effect on the ability of its stock to climb higher.
I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com
