U.S. stocks declined sharply on Friday following the outbreak of the coronavirus across the globe and more cases reported from China. Moreover, a couple of weak economic data for the U.S. economy also dented investors’ confidence.
Market participants have shifted investment from risky equities to safe-haven assets like gold and government bonds. All three major stock indexes plunged on Friday. For the week as a whole, these indexes finished in red.
The Dow Jones Industrial Average (DJI) tumbled 0.8% or 227.51 points to close at 28,992.40. The S&P 500 tanked 1.1% to close at 3,337.75. Meanwhile, the Nasdaq Composite Index closed at 9,576.59, plummeting 1.8%. The fear-gauge CBOE Volatility Index (VIX) jumped 9.8% to close at 17.08, highest closing since Feb 3.
A total of 8.28 billion shares were traded Friday, higher than the last 20-session average of 7.66 billion. Decliners outnumbered advancers on the NYSE 2.17-to-1 ratio. On Nasdaq, a 2.25-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory with 21 components of the 30-stock index closing in the red while 9 ended in green. The blue-chip index posted its worst one-day percentage decline since Feb 7.
The benchmark S&P 500 finished also in the red. The technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY) and the Communication Services Select Sector SPDR (XLC) plummeted 2.2%, 1.5% and 1.5%, respectively. Notably, eight out of 11 sectors of the benchmark index closed in the red while three finished in green.
The Nasdaq Composite ended in the negative territory due to weak performance by semiconductor stocks. The tech-laden index recorded its largest single-day percentage drop since Jan 27. Shares of Advanced Micro Devices Inc. AMD and NVIDIA Corp. NVDA plunged 7% and 4.7%, respectively. NVIDIA carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coronavirus Outbreak Intensifies
China reported a jump in the coronavirus cases. So far more than 2,500 people died in China out of over 77,000 virus-infected people. The death toll in South Korea crossed 250. Japan is also suffering from the spread of coronavirus disease in that country. Recently, Italy alarmed its citizens after the death of death of four Italians due to the same cause. Globally, more than 20 countries are now affected from coronavirus disease.
Demand Grows for Safe-Haven Assets
Demand for safe assets like gold and government bonds surged as more funds are shifted from equities to these assets. The price of gold for future delivery jumped 1.8% or #28.30 to settle at $1,648.80 an ounce on Comex. For the whole week, the yellow-metal gained 3.9%, reflecting its largest weekly gain since the week ended Jun 21, 2019.
Moreover, the yield on short-term 2-Year US Treasury Note declined to 1.348%. The yield on the benchmark 10-year US Treasury Note declined to its 5-month low to 1.47%. Meanwhile, the yield on long-term 3-year US Treasury Note plummeted to its all-time low to 1.917%.
Weak Economic Data
The IHS Markit reported that the index for U.S large service-centric businesses fell to 49.4 in February from 53.4 in January. Any reading below 50 indicates contraction in activities. As per IHS Markit, U.S. services sector contracted in February for the first-time in four years. Meanwhile, U.S. manufacturing index declined to 50.8 in February from 51.9 in the previous month.
The National Association of Realtors reported that U.S. existing home sales for the month of January decreased 1.3% to 5.46 million in January. However, the metric surpassed the consensus estimate of 5.42 million. December’s data revised slightly downward from 5.54 million to 5.53 million.
Meanwhile, Bloomberg News reported that sales of passenger cars in China for the first two weeks of February crashed 92% year over year from 60,000 to just 5,000.
Last week was a disappointing one for Wall Street. All three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – tanked 1.4%, 1.3% and 1.6%, respectively. Reports of more and more coronavirus cases in China and its spread in several other countries dented investors’ confidence to a large extent. A large chunk of funds shifted from equities t safe-haven assets market witnessed severe volatility.
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