Gold slides to 1-wk low; eyes 3rd monthly gain as virus worsens
February 28, 2020
“Gold slid more than 1% to its lowest in a week on Friday as the recent price rallies prompted investors to take profits, but the metal was still on track for a third consecutive monthly gain as the spread of coronavirus gathered pace. Spot gold was down 1% to $1,623.51 per ounce, having surged as much as 1.3% in the last session. U.S. gold futures slipped 1.1% to $1,625 per ounce. ‘There’s a bit of profit-taking in gold,’ Bank of China International analyst Xiao Fu said, adding she was ‘not surprised to see some correction from time to time especially when you have excessive build-ups.’
Gold has added around 2% so far this month, having hit a 7-year high of $1,688.66 earlier this week as coronavirus spooked markets. ‘The market is pricing in three cuts (in U.S. interest rates) by the end of this year and that’s increased from one cut (expected) earlier. So, the sentiment has shifted and with lower U.S. yields, we should see gold prices be very supported,’ Fu said. Four more countries reported their first virus cases, with countries other than China now accounting for about three-quarters of new infections.”
INVESTOR’S BUSINESS DAILY/Ed Carson
Dow Jones Plunges as Coronavirus Stock Market Correction Intensifies; Tesla, Apple, Beyond Meat — Notable Losers
February 28, 2020
“The Dow plunged Friday, along with the S&P 500 and Nasdaq. The coronavirus stock market correction intensified Thursday, with the Dow Jones and other major indexes all falling more than 4%. The U.S. is monitoring thousands of people in California for possible Covid-19 infections, while coronavirus cases continued to spread. Apple stock, Amazon.com, Microsoft, Nvidia and Tesla were among the big-cap losers. All are set to retreat significantly on Friday, with Tesla stock and Nvidia set to test key support.
Microsoft stock plunged 7% on Thursday, knifing below its 50-day line after the software giant warned on the coronavirus late Wednesday. Apple, which had its own coronavirus warning last week, tumbled 6.5%. Amazon stock fell 4.8%, below its 50-day line and erasing all its post-earnings gains. Nvidia stock skidded 5.6%, though it did hold above its 50-day. Tesla retreated 13% Thursday on news that its electric vehicle registrations in China tumbled 46% in January vs. December, largely before the coronavirus crisis ramped up. TSLA stock is down 29% this week. But that follows 12 straight weekly gains for Tesla stock. Shares of Axon Enterprise, Beyond Meat and Autodesk fell.”
MARKET WATCH/Steve Goldstein
Major bank economist says the coronavirus market reaction ‘boggles the mind’
February 28, 2020
“U.S. stocks have entered correction territory in what S&P Dow Jones Indices says is the shortest span in over 70 years. Futures prices imply a 75% chance of an interest-rate cut from the Fed within the next month. The reaction doesn’t make sense to Tom Porcelli, chief economist at RBC Capital Markets and one of the primary dealers of U.S. Treasury securities. ‘What do rate cuts at the front-end do exactly to shift the trajectory of the core short-term problems stemming from COVID-19? It boggles the mind. Cutting now when Fed funds is already sitting 100 basis points below neutral further cements the dangerous precedent already set that the only independent variable in the policy reaction function that matters is what the S&P 500 is doing of late,’ he says.
RBC’s tracking of the U.S. economy finds it not just fine but better than average. Even the durable-goods orders report released on Thursday had some positive signs for capital expenditure going forward. Porcelli finds the stock market reaction severe. ‘To be sure, we sympathize with the narrative that some economic activity could be lost for good. In other words, you don’t double up on certain services spending once the dust settles because you put it off on COVID-19 fears. But a short-term drop-off in activity has a diminishing impact on the net present value of future cash flows the further out your horizon goes! In other words, even if we are looking at a supply shock where postponed activity does not fully get recaptured, it still does not warrant a [more than] 10% repricing in a market that is supposed to be forward-looking in nature and ultimately realigns with fundamentals,’ he says.”
Dow tumbles 1,000 points for third time this week as Friday’s sell-off worsens
February 28, 2020
“Stocks tumbled once again on Friday, adding to the market’s worst week since the financial crisis, as worries over the coronavirus and its impact on the economy continue to rattle investor sentiment.
The Dow Jones Industrial Average dropped 1,000 points, or more than 4%, to trade below 25,000. The S&P 500 slid 4% while the Nasdaq Composite fell 3%. The major averages were under pressure on Friday in part because investors kept adding to their bond-market exposure and fleeing equities. The benchmark U.S. 10-year Treasury yield touched a fresh record low. It was last at 1.18%. Yields move inversely to prices. New Zealand and Nigeria reported overnight their first coronavirus cases. South Korea, meanwhile, confirmed more than 500 new cases. China reported 327 additional cases. Caterpillar — a bellwether stock for global growth — slid 3%. Apple shares dropped 5.7% while Boeing and Coca-Cola also fell more than 5%.
The Cboe Volatility Index, also known as Wall Street’s so-called fear gauge, hit a high of 47.15, its highest level since February 2018. It last traded around 41. The Dow plummeted nearly 1,200 points on Thursday — its biggest one-day point drop ever — as worries over the coronavirus possibly spreading sent stocks spiraling lower. The 30-stock average closed in correction territory along with the S&P 500 and Nasdaq Composite.”
Markets Are Pricing in a Coronavirus Recession
February 28, 2020
“Global markets have entered the meltdown stage, accelerating in the past few days beyond a relatively orderly stock-market correction. With coronavirus cases now on all continents this is no longer a domestic China problem; that suddenly dawned on complacent investors after last weekend’s big outbreak in Italy. Hence the stampede to get into cash as lockdowns and states of emergency have multiplied, from Lombardy to Japan’s northern island of Hokkaido. Any attempt by the stock markets to bounce is just being seen as an opportunity to offload more shares. This is a catch-up effect and is starting to look overdone.
Investors hate uncertainty and the deluge of virus warnings from businesses is alarming, but the markets are starting to price in a global recession and that doesn’t seem a true reflection of the virus’s impact. Largely, this is down to portfolio protection. It’s also a symptom of the longest-ever bull market for equities; a catalyst for a long overdue correction that has been delivered all at once. As my colleague Chris Hughes has noted, many of the biggest European companies have problems that predate the virus scares. With an increasing amount of investments in passive index funds there’s a shoal effect. Re-weighting out of equities into the perceived safety of bonds is the knee-jerk reaction, even if yields are non-existent. It becomes a return of capital game rather than return on capital. Poor corporate results are going to be punished more heavily in a febrile market environment.”
THE WALL STREET JOURNAL/Avantika Chilkoti and Chong Koh Ping
Stocks Fall Sharply, Face Biggest Weekly Losses Since 2008
February 28, 2020
“Stock markets around the world extended a punishing selloff, dragged toward their worst week since the financial crisis by mounting investor unease about the fallout from the coronavirus epidemic. The S&P 500 fell 3.5% shortly after the opening bell, a day after the biggest percentage drop in U.S. markets since August 2011. The Dow Jones Industrial Average shed 1,059 points, or about 4% and now trades about 16% below its Feb. 12 high. The tech-heavy Nasdaq lost about 3.4%.
‘We’re drinking from a fireman’s hose this morning,’ said the managing director at Baird. ‘It wasn’t a good close last night and certainly panic ensued.’ … Fears about the coronavirus have rapidly mushroomed, with investor anxiety that its spread will dent economic growth around the world strengthening as new cases cropped up. Goldman Sachs Group Inc. said it’s now expecting 0% corporate earnings growth in 2020. Investors have been trading at a frenzied pace, fueling the swift decline. Stock trading volumes jumped to a year-long high on Thursday while listed options trading this week soared to some of the highest levels ever. The frenetic trading helped push the S&P 500 down over 10% from its recent highs at unprecedented speed, with the S&P 500 falling from a record into a correction in just six sessions. The Stoxx Europe 600 was down 4.5%. In Asia, Japan’s Nikkei 225, South Korea’s Kospi and Australia’s S&P/ASX 200 all closed down over 3%.”