Fears that the coronavirus is becoming a
pandemic, danger of millions of Chinese businesses going under and the danger
of U.S. electing its first social democrat all combined to un-nerve investors to
produce a one-day perfect storm.
Fears that the coronavirus is becoming a pandemic, danger of millions of Chinese businesses going under and the danger of U.S. electing its first social democrat all combined to un-nerve investors to produce a one-day perfect storm.
By James DiGeorgia
A perfect storm hit Wall Street today, driving the Dow Jones down by over 1,000 points while crushing the S&P and NASDAQ. The selling started in Asia and spread to Europe as governments on at least three continents struggled to keep the coronavirus from spreading more widely outside China.
Investors worried that the coronavirus is threatening the survival of millions of Chinese businesses while at the same time threatening the solvency of China’s banking system. Despite repeated assurances that the virus is under control and won’t be a problem by President Trump, his chief economic advisor Larry Kudlow the sudden recognition that a Chinese liquidity crisis could develop along with the coronavirus turning into a pandemic had investors all over the world dumping stocks, risk and moving into safe havens such as U.S. Treasuries and gold which surged as high as $1,700 an ounce.
In one of the wildest trading days in years across markets, these were some of the wildest results as the U.S. Markets:
- The Dow Jones was down 1,031.4 points – 3.5%. The S&P 500 Index tumbled 111.85 points or 3.35%. The Nasdaq fell 355.31 points or 3.71%.
- The Dow Jones Industrial Average erased all of its gains for the year.
- FANG stocks took a beating plunging more than than 4%. AMD Corp. what hit badly over concerns that its chips orders from China may dry up if this health crisis turns into a pandemic. AMD at one point sunk by more than 10%. High-flyers like Tesla fell by more than 7%. Meanwhile, Alpha Pro Tech (APT-NYSE, maker of protective clothing and masks, surged by more than 24%.
- The yield on 10-year U.S. Treasuries approached the 2016 record low as the Federal Reserve let it be known it may have to cut interest rates this year as many as three times. Should China have to dump $1 Trillion or more in its U.S. Treasuries – we could see interest rates sink to or even below 1%. Given the U.S. is adding $1T a year in debt and all debt in the United States may be over $50 Trillion, a 1% or less Fed rate would be insanity.
- Meanwhile, Spot gold approached $1,700, while Brent crude oil tumbled about 5% on concerns that a pandemic would crush the demand for oil.