Many on Wall Street believe the market’s volatility from the coronavirus contagion is overblown, but that doesn’t mean the big firms are taking any chances. FOX Business has learned every major financial firm is putting contingency work plans in place should the virus continue to spread.
The moves come as markets have declined precipitously amid fears the virus will curtail economic growth and earnings. This week, the Dow Jones Industrial Average lost 3,583 points and 12.4 percent; the Nasdaq lost 1,009 points and 10.5 percent; the S&P lost 384 points and 11.5 percent.
Some Wall Street traders tell FOX Business they believe the economy’s fundamentals are strong and that the mass-selling is the result of profit-taking because it is uncertain how a pandemic might impact global economies and ultimately corporate earnings.
“I don’t think this is going to send the U.S. economy into a recession,” UBS financial adviser Rich Leone told Neil Cavuto today on FOX Business. “I think it’s more likely than not the bull market continues, the economic expansion continues despite the short term volatility we’re seeing as a result of the coronavirus fears.”
To be sure, markets may be overreacting, as they often do when information is scarce. That’s particularly true in how the coronavirus is affecting China, the world's second-largest economy and birthplace to the virus. Some analysts say that the Chinese economy is already recovering from the outbreak, which means harm to U.S. economic growth and corporate earnings may be minimal.
But other analysts are less sanguine. They point to the fact the virus has already spread elsewhere in the world, which makes the outbreak a significant public health problem for international businesses.
And since banks and financial firms are global, they have been at the forefront in preparing for the worst the virus might have to offer.As FOX Business was first to report, the New York Stock Exchange (NYSE) on March 7 will test its electronic trading systems “as if the 11 Wall Street trading floors were unavailable.”
In the past, NYSE has been criticized for its poor response to disasters, especially following Hurricane Sandy, when U.S. equity markets were closed for two days. The stock exchange was unable to open even as other exchanges including BATS Global Markets and Nasdaq were fully operational.
But the NYSE, unlike its competitors, is a market that mixes computerized trading with human floor traders and market makers.
The exchange did not return a request for comment.
Meanwhile, at the Nasdaq, officials are discussing how to run its fully electronic market if support staff can’t make it to the office.
In a statement, a Nasdaq spokesman said, "The health and safety of employees and clients is paramount to Nasdaq. We are in contact with industry stakeholders and following guidance from the WHO and CDC. We are focused on ensuring markets continue to operate normally and will update our communications and processes accordingly and as necessary.”
Other top firms including JPMorgan Chase & Co. and Goldman Sachs Group, Inc. are also enacting precautions by following the guidelines recommended by the World Health Organization. Goldman Sachs said in a statement, that the company is: “Monitoring the recommendations of international and national health organizations and will continue to follow their guidance.”
JPMorgan, the world’s largest bank, sent a letter to its 250,000 employees Thursday night. The letter said it was restricting employee international travel to essential trips only and it asked employees who’d been to regions where the disease was rampant to self-quarantine for 14 days. JPMorgan also asked employees to test remote access capabilities should they need to work from home.
Another big bank, Credit Suisse, told FOX Business that it has already "implemented additional health and safety measures in our offices that are consistent with the guidance and recommendations from both the national and international health authorities, as well as regulatory authorities.”
Earlier Friday the World Health Organization upgraded the risk from the virus to “very high." However, just 62 of the 83,000 reported cases are in the United States.
“Investors have history on their side,” Leone adds. “When we’ve seen corrections in excess of 10 percent in the context of a bull market … in the vast majority of instances, we’ve gotten double-digit returns over the next twelve months.”