Stock market falls 4% and enters correction territory on coronavirus anxiety
27-Feb-20 16:25 ET
Dow -1190.90 at 25766.61, Nasdaq -414.29 at 8566.52, S&P -137.63 at 2978.76
briefing.com
[BRIEFING.COM] The stock market extended its recent sell-off by more than 4% on Thursday in a volatile session, as the widening spread of the coronavirus heightened pessimism among investors. The S&P 500 dropped as much as 3.5% shortly after the open, then cut its losses to 0.6% by midday, but ultimately closed at session lows with a 4.4% decline.
The Dow Jones Industrial Average (-4.4%), Nasdaq Composite (-4.6%), and Russell 2000 (-3.5%) experienced similar price action. Each of the major indices fell into correction territory, which is often defined as a decline of at least 10% from a recent high, and today's drop sent the S&P 500 well below its 200-day moving average (3046.58) amid heavy selling into the close.
From a sector perspective, all 11 S&P 500 sectors fell between 3.3% (health care) and 5.6% (real estate). Other notable moves included WTI crude falling 3.0% to $47.24/bbl to extend its weekly decline to 12.1% and the CBOE Volatility Index surging 42.1% to 39.16 in a protection trade against further equity weakness.
Regarding COVID-19, the CDC acknowledged the first coronavirus case of "unknown origin" in the U.S., which raised concerns about a community spread of the virus. California's governor fueled concerns by saying 28 people have tested positive and another 8,400 people are being monitored because of their travel.
The impact to global supply chains or consumer spending remains uncertain, but Goldman Sachs warned there could be no U.S. earnings growth in 2020 if the virus becomes widespread. Microsoft (MSFT 158.18, -11.99, -7.1%), meanwhile, was the latest high-profile company to issue a quarterly revenue warning, specifically for its More Personal Computing segment.
Current, and past, Fed officials offered their views on the matter. In an opinion piece for The Wall Street Journal, former Fed Governor Kevin Warsh argued that the Fed and other central banks should cut rates due to the coronavirus, while Chicago Fed President Evans reiterated the Fed's stance that it's still premature to provide guidance without more data.
Besides the coronavirus news, equity investors appeared to be taking cues from the Treasury market. For instance, the S&P 500's early morning low coincided with the high in the Treasury market. At session's end, the 2-yr yield declined five basis points to 1.10%, and the 10-yr yield declined one basis point to 1.30%. The U.S. Dollar Index fell 0.5% to 98.48.
Not all stocks closed lower, though. 3M (MMM 150.16, +1.20, +0.8%) and Clorox (CLX 168.70, +0.67, +0.4%) managed to eke out small gains amid speculation that demand for some of their products will increase due to the coronavirus.
Reviewing Thursday's batch of economic data, which barely drew attention during this volatile day of trading:
- January durable goods orders declined 0.2% (Briefing.com consensus -1.6%). Excluding transportation, durable goods orders were up 0.9% (Briefing.com consensus +0.2%).
- The key takeaway from the report is that it showed a nice pickup in business spending in January, evidenced by the 1.1% increase in nondefense capital goods orders excluding aircraft. Still, concerns about a slowdown in spending will persist since the spread of the coronavirus, and responses to control its spread, has intensified in February.
- Initial claims for the week ending February 22 increased by 8,000 to 219,000 (Briefing.com consensus 212,000). Continuing claims for the week ending February 15 decreased by 9,000 to 1.724 million.
- The key takeaway from the report is that the four-week moving average of 209,750 for initial claims remains at an encouragingly low level in terms of the labor market outlook.
- The second estimate for Q4 GDP was unchanged at 2.1% (Briefing.com consensus 2.2%) while the GDP Price Deflator (Briefing.com consensus 1.4%) was revised down to 1.3% from 1.4%.
- The key takeaway from the report is that it is backward-looking and can be easily dismissed in light of the more current growth problems related to the coronavirus.
- Pending Home Sales rose 5.2% in January (Briefing.com consensus +2.0%). Today's reading follows a revised 4.3 decline in December (from -4.9%).
Looking ahead, investors will receive the following data on Friday: Personal Income and Spending reports for January, PCE Prices for January, the revised University of Michigan Index of Consumer Sentiment for February, and the Advance reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories.
- Nasdaq Composite -4.5% YTD
- S&P 500 -7.8% YTD
- Dow Jones Industrial Average -9.7% YTD
- Russell 2000 -10.2% YTD
Market Snapshot
| Dow | 25766.61 | -1190.90 | (-4.42%) | | Nasdaq | 8566.52 | -414.29 | (-4.61%) | | SP 500 | 2978.76 | -137.63 | (-4.42%) | | 10-yr Note | +28/32 | 1.273 |
|
| | NYSE | Adv 308 | Dec 2472 | Vol 1.8 bln | | Nasdaq | Adv 490 | Dec 2743 | Vol 4.5 bln |
Industry Watch
| Strong: Health Care |
| | Weak: Real Estate, Energy, Utilities, Materials |
Moving the Market
-- Stock market sells off 4% in volatile session on coronavirus anxiety
-- Broad-based selling, S&P 500 closes below 200-day moving average (3046.58), CBOE Volatility Index surges 40%
-- Treasury market maintained strong disposition
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WTI crude drops another 3%, extends weekly decline to 12%
27-Feb-20 15:25 ET
Dow -775.01 at 26182.50, Nasdaq -272.20 at 8708.61, S&P -86.73 at 3029.66
[BRIEFING.COM] The S&P 500 is currently down 2.8% and back below its 200-day moving average (3046.88).
One last look at the S&P 500 sectors shows all 11 sectors trading lower between 1.9% (health care) and 4.0% (energy). The health care sector briefly traded in positive territory in midday action.
WTI crude settled lower by $1.46 (-3.0%) to $47.24/bbl. For the week, crude is now down 12.1%. |
