Dow futures point to fresh selling as coronavirus cases near 100,000 and bond yields tumble - MarketWatch

Stocks trade sharply lower Friday morning as investors focused on the number of confirmed cases of COVID-19 globally hitting 100,000, rather than a better-than-expected nonfarm-payrolls report for February.

The spread of the disease world-wide has placed pressure on safe-haven assets, notably driving the U.S. Treasury 10-year bond yield to a new record low below 0.7%, reflecting increased worries about the economic impact of the disease world-wide. Yields fall as bond prices rise.

See:Why stocks tanked despite the Fed’s emergency rate cut

How are major benchmarks faring?

The Dow Jones Industrial Average DJIA, -2.47% dropped 745 points, or 2.9%, to 25,376, while the S&P 500 SPX, -2.96% was down 80 points, or 2.6%, at 2,944. The Nasdaq Composite COMP, -3.07% dropped 216 points, or 2.4%, to 8,523.

On Thursday, the Dow closed at 26,121.28, down 969.58 points, or 3.6%, while the S&P 500 lost 106.18 points, 3.4%, to close at 3,023.94. The Nasdaq fell 279.49 points, 3.1%, to close at 8,738.60.

For the week, the Dow was clinging to a 0.2% gain, the S&P 500 was off 0.5% and the Nasdaq has shed 0.5%, as of late-morning Friday.

What drove the market?

Stocks were looking to end a volatile week with further losses as the spread of the viral outbreak that was first identified in Wuhan, China intensifies, accelerating purchases of assets perceived as safe havens and placing further pressure on those considered risky like stocks.

Those factors overshadowed better-than-expected jobs numbers from the Labor Department, which reported that the U.S. created 273,000 new jobs in February. However, the data was compiled before the coronavirus contagion spread world-wide. Economists polled by MarketWatch had forecast a 165,000 increase.

“The US [jobs] number was decent but it failed to tame the turmoil in the equity markets and investors are not even remotely interested in riskier assets,” wrote Naeem Aslam, chief market analyst at AvaTrade in a note after the nonfarm payrolls report.

The unemployment rate fell a notch to 3.5% and matched a 50-year low, with average wages paid rising 9 cents, or 0.3%, to $28.52 an hour.

“The COVID-19 infection rate is multiplying and more states in the U.S. are imposing emergency orders,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Friday note.

The disease has sickened 100,000 people so far and the death toll has risen to 3,300 while disrupting international trade and travel, compelling central banks to reduce their benchmark interest rates. On Tuesday, the Federal Reserve cut its federal-funds target rate by a half a percentage point to a 1%-1.25% range, in the first emergency rate cut by the U.S. central bank since the 2008 financial crisis.

See:COVID-19 case tally: 100,113 cases, 3,404 deaths

Late Thursday, Dallas Fed President Rob Kaplan said the epidemic’s impact might last for three to five months but expressed optimism about the U.S. chances of avoiding a recession due to the illness.

“I still believe we can get through this year without a recession,” Kaplan said, in an interview on Bloomberg Television. Kaplan is a voting member on the rate-setting Federal Open Market Committee’s which will meet on March 17-18.

However, some are doubtful that policy makers have the firepower to curb the potential economic harm from a deadly pathogen that is spreading rapidly.

“We disagree with central bank pronouncements that there is room to fight the crisis.” wrote George Saravelos, Deutsche Bank’s head of global head of currency research, in a recent research note.

Optimistic market participants, however, say, one positive takeaway from the jobs report is that it reflects that the domestic economy stands on a solid footing as it braces for the impact the infectious disease might bring. “Given the strength of the data though, the economy appears to have enough positive momentum to slow for a time without significant risk of tipping into recession,” wrote Jim Baird, chief investment officer for Plante Moran Financial Advisor, in a Friday research report.

Which stocks were in focus?

• TSLA, -5.24% Tesla Inc.s stock  was down 3.3% Friday, extending Thursday’s decline.
• AAPL, -2.99% Apple Inc.’s stock price target cut to $295 from $395 at Deutsche Bank. Shares fell 2.9%.
• BGG, -2.18% Briggs & Stratton Corp.  shares were up 2.3% after the company announces a charge.
• ON, -2.21% Apple supplier ON Semiconductor Corp. issued a revenue warning for the first quarter on Friday, due to the change in business conditions being created by the coronavirus COVID-19. ON shares edged up 0.4%.
• SKX, -1.69% Skechers USA Inc. shares  slid 3.2%, after the sporting shoe retailer said the fallout from the coronavirus has gotten worse since it last updated investors when it reported earnings last month.

How are other assets performing

The benchmark U.S. 10-year Treasury note TMUBMUSD10Y, 0.724% ticked to a fresh yield low below 0.7% in overnight trade as was currently at 0.74%. Bond yields rise as prices fall.

Gold for April delivery GCJ20, -0.25% had been up more than 1% at $1,681.90 an ounce, but had been approaching the psychologically important, round-number price of $1,700, before paring gains after the jobs report.

April crude futures CLJ20, -7.60% were sharply lower on the New York Mercantile Exchange as Russia resisted a call by its OPEC allies

The Cboe Volatility Index VIX, +18.75% rose 25% to 49.69 on Friday. The VIX is a gauge of implied volatility in the stock market. Its historic average is around 19.

The U.S. dollar DXY, -0.90% was down 0.9%, as gauged by a gauge of a half-dozen currency trading partners. The index is down 2.4% so far this week,

In Europe, stocks were broadly lower. The FTSE 100 FTSE, -1.93% was 3.4% lower, and the Stoxx Europe SXXP, -3.66% was trading 3.8% lower.

In Asia overnight, the Shanghai Composite Index SHCOMP, -1.21% fell 1.2% and Tokyo’s Nikkei 225 NIK, -2.71% skidded down 2.2%. The Kospi 180721, -2.16% in Seoul lost 2.2%. China’s CSI 300 Index 000300, -1.62% retreated 1.6%.

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2020-03-06 15:30:54Z
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