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!”
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: The U.S. stock market has officially plunged into correction territory—at the fastest rate ever recorded, suffering its worst losses since the 2008 financial crisis this week amid ongoing panic over the spreading coronavirus and its impact on the global economy.
This week alone, the Dow Jones industrial average fell a total of 14%, the S&P 500 by 13% and the Nasdaq Composite by 12.3%.
The Dow plummeted nearly 1,200 points on Thursday—its biggest one-day drop ever, thanks to the coronavirus, which has now spread to at least 49 countries in a matter of weeks. Those losses continued on Friday, though the drop was somewhat less severe: The Dow fell 1.4%, while the S&P 500 sank 0.8%.
In a statement to reassure anxious investors, the Federal Reserve said on Friday that it was monitoring the “evolving risks to economic activity” posed by the coronavirus and further pledged to “act as appropriate” to keep the U.S. economy stable.
Some experts are skeptical any action from the central bank can stem market fallout from the coronavirus; Mohamed El-Erian, chief economic advisor for Allianz, told CNBC on Thursday that “markets will start freezing up even if the Fed cuts rates, which I think they will.”
National Economic Council director Larry Kudlow on Tuesday told CNBC that the virus is unlikely to become a full-fledged economic crisis, and described this week’s sell-off as a good buying opportunity. That same day, however, the CDC warned that the American public should brace for major disruptions from the coronavirus.
Among the stocks that have been hard hit this week are Apple (which is now flirting with bear market territory after falling 20% off its record highs) and American Airlines, which fell more than 25% this week.
Tangent: Hundreds of companies, from Apple and Nike to Starbucks and Microsoft, have issued warnings that the coronavirus will impact financial results for the first quarter and beyond. In a note on Wednesday, investment banking giant Goldman Sachs revised down its estimate for U.S. corporate earnings in 2020, forecasting 0% earnings growth for 2020 as a result of the outbreak.
Chief critic: “Markets are much too negative on the coronavirus. . . . The market was too expensive earlier in the year, but the coronavirus panic is overdone,” says Vital Knowledge founder Adam Crisfaulli. He points out that though the economic and corporate earnings fallout from the coronavirus will be severe, economic activity in China is normalizing, and that should help the bulk of the fallout remain confined to the first quarter.
Crucial quotes: “The global stock sell-off is showing no signs of slowing down,” says Edward Moya, senior market analyst at Oanda. He predicts the major indexes could “easily” enter bear market territory, though “expectations are still pretty high that the market will eventually snap back.”
“It has been a brutal week,” says Mark Freeman, chief investment officer at Socorro Asset Management. He expects a further sell-off next week, as investors wait to see how the situation evolves and how the Fed will respond, but says that “it is too early for the Covid-19 crisis to have a material impact on [U.S. economic] data.”
“This week reminded many investors of 2008, which isn’t a happy memory,” says Ryan Detrick, senior market strategist for LPL Financial. “Nonetheless, remember that the overall economic backdrop is still healthy in the U.S., but when fear grips, that doesn’t matter.”
“The impact to the economy will be severe, but not enough to create a recession (e.g., two consecutive quarters of negative growth),” says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “It is the uncertainty that is most difficult to price in, so people are selling in the advance of concrete information.”
Crucial statistic: The benchmark U.S. ten-year Treasury yield hit a new bottom on Friday, falling below 1.12%.
Key background: Stock market losses accelerated after the CDC confirmed the first case of “community transmission” of the coronavirus in Sacramento, California. Globally, more than 83,700 people have been infected as of Friday, with more than 2,800 dead. Earlier this week, Italy, South Korea and Iran emerged as new coronavirus hot spots outside of China, causing further concern that the outbreak will spread to other major economies. The World Health Organization said on Friday that the virus now poses a “very high” risk at a global level.
I am a New York—based reporter for Forbes covering breaking news, with a focus on financial topics. Previously, I wrote about investing for Money Magazine and was an intern at Forbes in 2015 and 2016. 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 email@example.com
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
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 firstname.lastname@example.org