THAT SICK FEELING
Virus, weak data erase markets’ 2020 gains
The coronavirus has Wall Street feeling nauseous over the economy.
The Dow Jones industrial average plummeted more than 600 points Friday, erasing all of its gains for the year as the viral, flu-like outbreak in China, combined with weak economic data, stoked worries that a global slowdown may be in store.
Delta, United and American Airlines said Friday they’re cancelling all flights between the US and China, fanning fears that the epidemic is poised to put the brakes on the world economy. A profit warning from Caterpillar, meanwhile, raised fresh alarms about the outlook for growth.
The dire corporate news came after the World Health Organization declared the coronavirus — which has sickened more than 9,500 and killed more than 200 — an international emergency. The Trump Administration followed suit moments before the market closed, deeming the outbreak a public health emergency and barring entry to the country for anyone who has traveled to China within the last 14 days.
The Dow finished down 603.41 points, or 2.1 percent, at 28,256.03. The S&P 500 was down 58.14 points, or 1.8 percent, at 3,225.52.
“This is very ugly,” said one
New York-based macro trader. “This virus is making it hard to ignore all the stuff we’ve been ignoring for months.”
Investors dropped stocks and bonds as they headed for safe havens, including Treasurys and gold. Energy was the worst stock sector, as Exxon Mobil and Chevron each dropped more than 4 percent after disappointing results.
Meanwhile, copper prices — a key indicator of future construction activity — fell for the 13th straight day on Thursday, an unprecedented fall.
“I’ve been trading copper for 40 years and I’ve never seen anything like it,” said Grenville Craig, founder of Tiverton Trading. “Down 13 days in a row? It’s unbelievable.”
Craig also noted that the price of gold has soared as central banks stockpiled the precious metal in a move that usually precipitates an economic slowdown.
“I’ve been 50/50 on a recession for a year and now I’m 60/40, 70/30,” he said. “When a market move is so brutal, and so fast and so unexpected, you have to react.”
Elsewhere, the Chicago Purchasing Managers’ Index, which measures the health of the manufacturing sector in the American Midwest, came in at 42.9 for January, down from 48.9 in December. Any reading below 50 indicates trouble for US manufacturing, and analysts had predicted that the index would fall only a bit to 48.5.
“US indicators have not been great for a while, but now there seems to be an acknowledgement that something is actually wrong now,” mused Daniel Simulevic, a global macro fund manager. “Fears about growth have been reflected in commodities but not the stock market.”
Amidst all the red ink was one bright green exception on Friday: Shares in Amazon rose as much as 9.5 percent in Friday trading after smashing analysts’ estimates Thursday afternoon. The stock closed Friday at $2,008.72, up 7.4 percent, or $138.04. The online retailer’s market cap is now over $1 trillion.