Dow closes in bear market territory amid pandemic fears
11-Mar-20 16:25 ET
Dow -1464.90 at 23553.32, Nasdaq -392.20 at 7952.06, S&P -140.85 at 2741.38
briefing.com
[BRIEFING.COM] It was an ugly day for stocks on Wednesday with the Dow Jones Industrial Average (-5.9%) closing in bear market territory, or down 20% from a recent high, amid recessionary fears induced by the coronavirus. The S&P 500 fell 4.9%, the Nasdaq Composite fell 4.7%, and the Russell 2000 fell 6.4%.
The World Health Organization officially declared COVID-19 as a global pandemic, and with no stimulus plan enacted from Washington, the market was left with discouraging news updates that heightened the economic uncertainty.
Large events were banned in Washington State and San Francisco with many more getting canceled or delayed in other U.S. states. Dr. Fauci, the director for the National Institute of Allergy and Infectious Diseases, cautioned that the worst is yet to come. President Trump was even reportedly considering new travel restrictions on Europe.
It was an orderly retreat on Wall Street with sector losses ranging from 3.9% (health care) to 5.9% (industrials). The market did close off its lows, though, pulling the S&P 500 out of bear market territory, in front of a statement from President Trump tonight.
Boeing (BA 189.08, -41.93, -18.2%) shares dropped 18% on news that it froze hiring and will be drawing on its $13.8 billion loan earlier than expected due to the coronavirus. PepsiCo (PEP 129.75, -4.39, -3.3%), meanwhile, secured a deal during the market turbulence, agreeing to purchase Rockstar Energy Beverages for $3.85 billion.
Separately, the NY Fed announced it will raise daily oversight repo limits to $175 billion from $150 billion beginning tomorrow and continuing through April 13 in response to unfavorable market conditions caused by the coronavirus. Elsewhere, the Bank of England issued an emergency 50-basis points rate cut to 0.25%, but the UK's FTSE still declined 1.5%.
Notably, U.S. Treasuries didn't exhibit the flight-to-safety one would expect during an exodus from stocks. Some profit taking and speculation that Washington will have to issue more debt to finance a fiscal stimulus plan were the leading explanations for the decline in bonds.
The 2-yr yield increased three basis points to 0.50%, and the 10-yr yield increased seven basis points to 0.82%. The U.S. Dollar Index increased 0.1% to 0.82%. WTI crude fell 3.7%, or $1.25, to $33.00/bbl amid news that Saudi Arabia ordered Saudi Aramco to boost production by 1 million barrels per day to 13 million barrels per day.
Reviewing Wednesday's economic data, which featured the Consumer Price Index for February:
- According to the BLS, the Consumer Price Index (CPI) increased 0.1% m/m in February (Briefing.com consensus 0.0%) while core CPI, which excludes food and energy, rose 0.2% (Briefing.com consensus 0.2%). Those changes left CPI up 2.3% yr/yr, versus 2.5% in January, and core CPI up 2.4%, versus 2.3% in January.
- The key takeaway from the report is that it isn't going to alter the market's belief that the Federal Reserve will soon be cutting the target range for the fed funds rate in size at next week's FOMC meeting (if not sooner).
- The Treasury Budget for February showed a deficit of $235.34 bln versus a deficit of $233.98 bln a year ago. The Treasury Budget data is not seasonally adjusted, so the February deficit cannot be compared to the deficit of $32.6 billion for January.
- The weekly MBA Mortgage Applications Index surged 55.4% following a 15.1% increase in the prior week.
Looking ahead, investors will receive the Producer Price Index for February and the weekly Initial and Continuing Claims report on Thursday.
- Nasdaq Composite -11.4% YTD
- S&P 500 -15.2% YTD
- Dow Jones Industrial Average -17.5% YTD
- Russell 2000 -24.2% YTD
Market Snapshot
| Dow | 23553.32 | -1464.90 | (-5.86%) | | Nasdaq | 7952.06 | -392.20 | (-4.70%) | | SP 500 | 2741.38 | -140.85 | (-4.89%) | | 10-yr Note | -5/32 | 0.862 |
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| | NYSE | Adv 150 | Dec 2665 | Vol 1.8 bln | | Nasdaq | Adv 378 | Dec 2910 | Vol 4.3 bln |
Industry Watch
| Strong: none |
| | Weak: Real Estate, Industrials, Utilities |
Moving the Market
-- Stock market sells off more than 5.5% amid virus pandemic fears
-- Fiscal stimulus hopes dim as economic slowdown starts to manifest in nationwide event cancellations
-- Longer-dated Treasuries also decline
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S&P 500 technically enters bear market territory
11-Mar-20 15:25 ET
Dow -1653.30 at 23364.92, Nasdaq -486.22 at 7858.04, S&P -170.79 at 2711.44
[BRIEFING.COM] The S&P 500 is down 5.8% and entered bear market territory earlier, having fallen at least 20.0% from its recent (all-time) high.
One last look at the S&P 500 sectors shows seven sectors down at least 6.0%. Losses range from 4.9% (health care) to 6.8% (industrials).
WTI crude fell $1.25 (-3.7%) to $33.00/bbl amid news that Saudi Arabia ordered Saudi Aramco to boost production by 1 million barrels per day to 13 million barrels per day. |
