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The world’s faltering effort to contain the coronavirus outbreak led to a rout in stocks and crude oil on Monday, as new cases surfacing across the globe amplified fears of a downturn. Each of the three major indices dropped more than 7% by market close, with the Dow shedding more than 2,000 points.
The decline marked the largest one-day point loss for the Dow on record, and the largest single-session percentage hit since 2008. The S&P 500’s more than 7% drop was also the most since December 2008, led by stunning declines in the Energy and Financial sectors.
Worldwide cases of COVID-19 have topped 109,000 — with Italy emerging as the worst-hit country outside of China and the biggest in Europe, as new infections rise in the U.S. The Italian government’s move to quarantine its entire northern region raised new fears about the pathogen becoming a global pandemic, sending markets into a free-fall.
A grim offshore trading session turned into a full-fledged rout as equities sold off — which even a brief “circuit-breaker” trading halt couldn’t staunch. In the bond market, the benchmark U.S. 10-year Treasury interest rate fell to a new all-time low, with the entire yield curve falling below 1% during Monday’s session.
Brent crude (BZ=F) prices collapsed, falling by more than 30% on Sunday evening in what was the largest single-day drop since the U.S. invaded Iraq in 1991. Prices for Brent and West Texas intermediate crude oil each settled lower by more than 20% Monday.
OPEC’s failure last week to strike a deal to cut production prompted Saudi Arabia to lean in aggressively on cheaper oil prices, which fanned concerns about a full-fledged price war that sent oil into free-fall. Investors appeared to price in the likelihood that Saudi Arabia’s fight with Russia over market share will worsen the dramatic spiral lower in prices, taking place against a backdrop of falling demand and plentiful supply.
The coronavirus epidemic has stoked fears of a sharp global downturn, which have in turn weighed heavily on major benchmarks and crude (CL=F).
Most economists estimate that cheaper oil translates into lower gasoline prices, which act as a de-facto tax cut for consumers.
Yet with the COVID-19 epidemic creating supply shocks and forcing business activity to grind to a halt, analysts don’t see much to cheer about in the current price action.
“There's always winners and losers in any market, but right now the idea that lower gasoline prices is going to put more cash in workers' pockets and give consumer spending and the economy a boost doesn't seem to cushion the blow for stock market investors,” wrote Chris Rupkey, MUFG’s chief financial economist, in an email on Sunday evening.
“They want out. Big time. The sky is falling,” he said.
Other analysts agreed that lower oil prices ultimately represent a downside risk to the domestic economy.
“Lower oil prices used to be an unambiguous positive for the U.S. economy as a significant net oil importer with energy consumption dominating over any domestic production,” Morgan Stanley economist Robert Rosener said in a note Monday. “But with gains in the domestic energy industry over this cycle, that relationship has grown to be increasingly balanced.”
While declining oil prices might add billions in disposable income to consumers’ wallets, the simultaneous concerns stemming from the COVID-19 outbreak will ultimately leave consumers hesitant to spend, Rosener said.
“A more cautious consumer in the current environment is likely to pare down the upside effect from lower oil prices in the near-term,” he added.
Analysts are also nervously eyeing U.S. shale producers, which are expected to suffer as cheap oil makes it unprofitable to churn out more supply. Most have financed expansion via debt, fueled by cheap credit.
“U.S. shale production is capital intensive, and debt servicing made for high fixed costs,” noted Marc Chandler, managing director at Bannockburn Global Forex. “Even before the latest shocks, shale producers were struggling.”
4:06 p.m. ET: Stocks end sharply lower, Dow drops 2,000 points
The three major indices each tumbled more than 7% by the end of Monday’s session, with the Dow off more than 2,000 points.
In the S&P 500, the energy sector remained the laggard, shedding 20% during Monday’s session.
Here were the main moves in markets at the end of regular equity trading:
S&P 500 (^GSPC): 2,746.70, down 225.67 or -7.59%
Dow (^DJI): 23,851.02, down 2,013.76 or -7.79%
Nasdaq (^IXIC): 7,950.68, down 624.94 or -7.29%
10-year Treasury (^TNX): yielding 0.589%, or down 11.8 basis points
2:46 p.m. ET: Oil settles lower by 24%, marking biggest one-day decline in almost 30 years
Crude oil prices held onto most of their losses into Monday’s settlement, cementing the commodity’s biggest one-day drop in prices since 1991.
West Texas Intermediate crude oil prices fell by 24.59% to settle at $31.13 per barrel. Brent crude declined 23.9%% to $34.45 per barrel as of 2:38 p.m. ET.
2:06 p.m. ET: Losses accelerate, Dow sheds 2,000 points
Declines in the major indices steepened with less than two hours left in the regular trading session. The Dow shed more than 8%, or 2,000 points, while each of the S&P 500 and Nasdaq were off by at least 6.9%.
Here were the main moves in markets, as of 2:07 p.m. ET:
S&P 500 (^GSPC): 2,742.03, down 230.03 or -7.75%
Dow (^DJI): 23,777.23, down 2,087.55 or -8.07%
Nasdaq (^IXIC): 7,999.29, down 575.99 or -6.7%
Crude oil (CL=F): $32.52, down $8.76 or -21.22%
10-year Treasury (^TNX): yielding 0.496%, or down 21.1 basis points
2:05 p.m. ET: Growing number of U.S. universities cancel in-person courses due to COVID-19 outbreak
A rising number of U.S. colleges canceled in-class instruction as the coronavirus outbreak escalates.
On Monday, Fordham University said it would be suspending face-to-face instruction at all of the college’s New York-area campuses, effective as of Monday afternoon. Meanwhile, Princeton University said it would be requiring all lectures and seminars be held virtually beginning March 23, after the school’s spring break.
Columbia University, which had one individual in the community quarantined due to exposure to the virus, said Sunday it would not hold classes Monday or Tuesday and would shift to virtual courses for the rest of the week. In New York, Hofstra University on Long Island and Yeshiva University in Manhattan each announced that classes would be canceled the rest of this week.
Stanford University in California nixed in-person courses for the last two weeks of its winter quarter, after one faculty member tested positive for COVID-19. In Texas, Rice University on Sunday canceled all in-person classes this week.
1:53 p.m. ET: White House to invite Wall Street leaders to discuss coronavirus concerns, CNBC reports
The White House is asking to meet with Wall Street executives to discuss the COVID-19 outbreak on Wednesday, according to a CNBC report citing an unnamed administration official. President Donald Trump is set to attend the meeting, the report said.
1:40 p.m. ET: Florida advises all individuals who traveled internationally to self-quarantine
The state of Florida issued an announcement Monday encouraging all individuals who traveled internationally to self-quarantine for 14 days following their return to the U.S., regardless of where they traveled.
As of Monday afternoon, 18 cases of COVID-19 had been reported among Florida residents. One hundred and fifteen coronavirus tests in the state are still pending, and another 1,104 people are being monitored, according to the Florida Department of Health.
1:08 p.m. ET: Dow drops nearly 1,700 points as sell-off continues
The three major indices held sharply lower Monday afternoon, with each of the S&P 500 and Dow off more than 6%.
Here were the main moves in markets, as of 1:08 p.m. ET:
S&P 500 (^GSPC): 2,787.99, down 184.38 or -6.2%
Dow (^DJI): 24,186.3, down 1,678.48 or -6.49%
Nasdaq (^IXIC): 8,106.7, down 467.45 or -5.42%
Crude oil (CL=F): $33.42, down $7.86 or -19.04%
10-year Treasury (^TNX): yielding 0.513%, or down 19.4 basis points
12:42 p.m. ET: European stocks slump, enter bear market
European shares slid Monday, with Europe’s benchmark STOXX 600 and the U.K.’s FTSE 100 each sinking into bear market territory.
The FTSE 100 fell 7.3% during the session to 5,994.04, sending it 22% below its recent closing high from July 2019. The Stoxx 600 fell 7.4% in its largest one-day decline since October 2008, also entering a bear market at 21.5% below its recent closing high on February 19 this year.
Bear markets are considered a 20% decline from a recent closing high.
12:15 p.m. ET: U.S. Department of Justice warns against coronavirus price gouging
The U.S. Justice Department said Monday that companies or individuals participating in price-fixing or bid-rigging for personal health protection products like face masks and sterile gloves could face prosecution. These items have become highly in demand amid the COVID-19 outbreak.
“The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time,” Attorney General William P. Barr said in a statement.
The announcement comes as individual companies have taken actions to try and stem price gouging on their platforms and beyond. Facebook banned ads for medical face masks, along with ads that implied limited supply for medical products, to help quell elevated consumer concerns surrounding the outbreak. Amazon last week removed hundreds of thousands of high-priced offers for personal medical items on its site.
11:19 a.m. ET: Oil stocks are getting destroyed
Energy names are tanking amid a broader decline in crude oil prices. The Energy sector lagged in the S&P 500, dropping more than 17%.
Here were some of the major decliners during intraday trading, as of about 11:19 a.m. ET:
Diamondback Energy (FANG): -48%
Apache Corp. (APA): -43%
Marathon (MRO): -41%
Halliburton (HAL): -34%
Noble (NE): -28%
Pioneer (PXD): -33%
Occidental (OXY): -31%
Hess (HES): -31%
Devon (DVN): -32%
10:20 a.m. ET: Walmart and Amazon, a tale of two retail giants
Monday’s ugly market featured the stock prices of two fierce retail competitors, Walmart (WMT) and Amazon (AMZN), diverging sharply. The former is up over 1% (on the heels of announcing a plan to hire 500 more truck drivers) while the latter is crashing along with other risk-sensitive “FAANG” tech stocks.
The juxtaposition is interesting given that Amazon is both a tech giant and a retailer, while the House that Sam Walton built is a big box retailer first and foremost. With nervous consumers buying food and home products en masse, it puts Walmart in a position to benefit, even if the coronavirus sends the global economy into a tailspin.
In new research, data analysis firm Placer.ai estimated that two types of retailers should be seeing surges of foot traffic: Wholesale grocers and pharmacies (incidentally, Walmart falls into both categories). According to Placer.ai:
The logic [is] that individuals would look to prepare themselves with the necessary medications and prevention tools while stocking up on key foods in case there were shortages, or leaving home became more worrisome.
...Visits to Costco rose 71.7% above the baseline on Saturday, February 29th, far above the equivalent Saturday in 2019 when visits were 45.0% above.
The same was true for Sam’s Club [a unit of Walmart] which saw visits rise 95.3% above the baseline on the final Saturday of February, a jump from 2019’s equivalent Saturday when visits were 77.3% above.
While Amazon is also reaping the rewards of panic buying, the behemoth has been forced to address price gouging on normally cheap consumer products sold on Amazon.com. In this case, brick and mortar is carrying the day.
Finally, Placer.ai noted that “there are indications that elements of the US retail economy will be far more resilient than expected....There are also players in the retail sector that could benefit. Wholesalers like Costco depend on low-frequency visits with large basket sizes, meaning the run on goods in late February could present a significant boost.”
10:15 a.m. ET: That bull market sure was fun while it lasted
Ironically enough, Monday marks the 11th anniversary of the closing low on the S&P 500 Index. That nadir kicked off the current bull market that became the longest bull market in history. Of course with the coronavirus panic, major benchmarks are now closer to hitting a bear market.
Here are the levels at which major indices would need to close in order to be considered in bear market territory. That means stocks need a 20% retreat from their recent closing highs (hit just last month, which now seems like a lifetime ago):
S&P 500: 2708.92
Nasdaq Composite: 7853.74
Russell 2K: 1392.60
9:49 a.m. ET: Stocks resume trading, S&P, Dow plunge anew
The S&P 500 and Dow extended losses after reopening following a 15 minute halt for trading. The broader market index slid about 7.2%, or more than 200 points, while the Dow plummeted by over 2000 points.
9:41 a.m. ET: Crude oil drops further, sinking 20%
U.S. West Texas Intermediate crude oil prices sank 20% Monday morning shortly after domestic equities opened for trading, hitting $32.73 per barrel. Brent crude oil, the international benchmark, fell 22% to $35.26 per barrel.
9:34 a.m. ET: Stocks trigger circuit breaker, trading to close for 15 minutes
The S&P 500 sank 7% as of 9:34 a.m. ET, hitting the percent decline required to trigger a 15 minute halt to trading intended to prevent extreme plunges in stock trading. Trading will resume at 9:49 a.m. ET.
9:32 a.m. ET: Stocks slump as markets open
Stocks opened sharply lower Monday morning. The Dow and Nasdaq tumbled more than 7% each, and the S&P 500 was off more than 6.9%.
Here were the main moves in markets, as of 9:32 ET:
S&P 500 (^GSPC): 2,765.78, down -206.59 or -6.95%
Dow (^DJI): 24,035.04, down -1,829.74 or -7.07%
Nasdaq (^IXIC): 7.971.78, down 603.84 or -7.04%
Crude oil (CL=F): $32.51, down $8.77 or -21.25%
10-year Treasury (^TNX): yielding 0.435%
9:20 a.m. ET: Credit Suisse cuts S&P 500 year-end price target as coronavirus outbreak weighs on corporate profits
Credit Suisse analyst Jonathan Golub on Monday slashed his 2020 price target for the S&P 500 to 3,300 from 3,600, with the new target representing 11% upside from Friday’s closing prices. Growth in earnings per share this year will be “near-zero” this year amid the coronavirus outbreak, he said.
Here’s what Golub had to say in his note:
The cadence of corporate profits should shift as a result of the virus, with the bulk of the downside (-8%) occurring in 2Q, and a rebound in the latter half of the 2020. As such, we are adjusting our 2020 EPS estimate to $165 from $175. Since the market’s peak on Feb.19, multiples have fallen to 16.7x from 19.0x. We believe this decline will largely reverse by year-end, taking the S&P 500 to 3300 vs. our previous target of 3600, representing 11% upside from Friday’s close. That said, we believe the deterioration in news flow is likely to lead to further downside to stock prices over the near-term, before drifting higher.
7:54 a.m. ET: How low can stocks go before triggering a ‘circuit breaker’?
U.S. stock futures triggered a so-called “circuit breaker,” or trading pause to prevent extreme plunges, during the overnight session Sunday after contracts on the S&P 500 dropped 5%.
During the regular trading session, the threshold of declines to trigger circuit breakers is as follows, according to the New York Stock Exchange:
Trading halts for 15 minutes if the S&P 500 drops 7% against closing prices the prior session (to 2,764.3)
Trading halts for 15 minutes if the S&P 500 drops 13% (to 2,585.96)
Trading halts for the rest of the session if the S&P 500 drops 20% (to 2,377.89)
7:42 a.m. ET: U.S. 10-year yield sinks to fresh record low as Treasuries along the entire yield curve sinks below 1% for the first time in history
Investors’ flight to safe haven assets sent the whole yield curve for U.S. bonds below 1% for the first time on record. As of 7:42 a.m. ET, the 10-year yield was down more than 30 basis points to 0.403%, and the 30-year yield slid 38.1 basis points to yield 0.835%.
At the lows of the session so far, the U.S. 10-year Treasury yielded as little as 0.318%, an all-time low, according to CNBC data.
7:34 a.m. ET: Fed increases size of repo operations amid market turmoil
The Federal Reserve Bank of New York is increasing the size of its overnight and term repurchase agreement (repo) operations this week, according to a statement Monday morning.
The overnight offering is set to increase to at least $150 billion, from $100 billion currently, starting Monday through March 12.
The March 10 and March 12 14-day repo operations will be raised to at least $45 billion, or more than double the $20 billion currently.
“These adjustments are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation,” according to the statement. “They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.”
7:25 a.m. ET Monday: S&P 500, Dow, Nasdaq futures each off at least 4.8% in early trading
Stock futures held onto overnight losses with about two hours to go until the opening bell. Contracts on the Dow were off by 4.87%, or more than 1,250 points, in early trading.
U.S. equity futures tracked losses in global stocks, with each of the DAX, FTSE 100 and CAC indices off more than 6% during regular trading in Europe. Major stock indices in Asia were also lower on the day.
Here were the main moves in markets, as of 7:25 a.m. ET:
S&P 500 futures (ES=F): 2,819.00, down 145 points or -4.89%
Dow futures (YM=F): 24,534.00, down 1,255 points or -4.87%
Nasdaq futures (NQ=F): 8,093.25, down 410 points or -4.82%
Crude oil (CL=F): $31.95 per barrel, down $9.33 or 22.6%
Gold (GC=F): $1,679.70 per ounce, up $7.30 or +0.44%
8:08 p.m. ET Sunday: U.S. 30-year Treasury bond trades below 1% for the first time ever
8:01 p.m. ET Sunday: S&P 500 plunge, triggering trading limit
S&P 500 futures (ES=F) fell 5% to 2,819, triggering a trading halt. The Chicago Mercantile Exchange does not allow these contracts to trade by more than 5% up or 5% down during non-U.S. trading hours.
7:50 p.m. ET Sunday: Markets are getting slammed
Here were the main moves during the pre-market session, as of 7:49 p.m. ET on Sunday night:
S&P 500 futures (ES=F): 2,831.25, down 132.75 points or -4.48%
Dow futures (YM=F): 24,807.00, down 982 points or -3.81%
Nasdaq futures (NQ=F): 8,130.75, down 372.5 points or -4.38%
Crude oil (CL=F): $32.91 per barrel, down $8.37 or 20.28%
Gold (GC=F): $1,698.50 per ounce, up $26.10 or 1.56%