Monday March 16th

16-03-2020

Stocks set to bounce as Wall Street attempts rebound from the Dow’s third-worst day ever

U.S. stock index futures and premarket trading in exchange-traded funds pointed to a bounce on Tuesday following the Dow Jones Industrial average’s third-worst day ever. Trading overnight, however, was very volatile with futures giving back more than 1,000 points as investors try to weigh the uncertain economic impact of the coronavirus outbreak. Dow Jones Industrial Average futures indicated a gain of more than 260 points at the open. The S&P 500 SPDR ETF gained more than 2% in premarket trading. Earlier in the session, futures contracts tied to the S&P 500, Dow Jones Industrial Average and Nasdaq 100 hit their upside limit, triggering an upside halt. In non-U.S. trading hours, stock futures are halted if they hit their downside or upside limits, pinning those contracts to their upper or lower bounds. The halt is meant to ensure that trading is orderly and not emotional. Overnight futures are the latest market to see eye-popping volatility as computer trading runs wild on Wall Street during the coronavirus market collapse. Those wild moves came after President Donald Trump tweeted: “The United States will be powerfully supporting those industries, like Airlines and others, that are particularly affected by the Chinese Virus. We will be stronger than ever before!” The Dow Jones Industrial Average and S&P 500 had their worst day since the “Black Monday” crash of 1987, falling 12.9% and 12%, respectively. It was also the Dow’s third-worst day ever. The Nasdaq Composite had its biggest one-day plunge ever, tumbling 12.3%. Trading halts typically occur amid extremely abnormal market volatility. The Cboe Volatility Index — Wall Street’s preferred fear gauge — posted its highest-ever close at 82.69. That tops the financial crisis’ peak of 80.74. Wall Street’s drop on Monday came even after the Federal Reserve slashed interest rates to near-zero on Sunday and announced a $750 billion asset-purchasing program. It also came as the number of coronavirus cases jumped in the U.S. Futures contracts tied to the major U.S. equity indexes rose after Politico and The Washington Post reported that Treasury Secretary Steven Mnuchin will ask congressional lawmakers for a stimulus package of $850 billion or more to help the U.S. economy grapple with the impact of the coronavirus. At least 4,281 cases have been confirmed in the U.S. along with more than 70 deaths, according to data from Johns Hopkins University. President Donald Trump also said the crisis could stretch into August, adding the administration may look at locking down “certain areas.” “Although the contemporary crisis is loaded with bad news, this has not been its primary problem. It’s the ‘unknown,’” said Jim Paulsen, chief investment strategist at The Leuthold Group, in a note. “Not even health experts understand what this is or where it is headed, and that is the worst possible outcome for investors.” “Give me bad news any day over complete uncertainty,” he said. Biotech giant Regeneron, meanwhile, said Tuesday morning that it’s aiming to have doses of a potential drug for COVID-19 ready to start human clinical trials by early summer. The announcement, which represents a marked acceleration in the company’s drug timeline, sparked a 10% rally in the company’s equity in premarket trading. The S&P 500 closed Monday at its lowest level since December 2018. The Dow ended the session at its levels not seen since early 2017. “For now until there is improvement in the trend … it’s tough to consider being long and it’s right to be in cash on the sidelines,” Mark Newton, managing member at Newton Advisors, said in a note to clients. Stocks in Asia Pacific were mixed on Tuesday as they seesawed after shares on Wall Street plunged to their biggest day drop in more than three decades overnight, and the Philippines shut its markets temporarily. Meanwhile, shares in mainland China ended their trading day lower. The Shanghai composite slipped 0.34% to around 2,779.64 while the Shenzhen composite edged 0.425% lower to approximately 1,704.74. Hong Kong’s Hang Seng index advanced 0.61%, as of its final hour of trading. In Japan, the Nikkei 225 closed slightly higher at 17,011.53. The Topix index surged 2.6% to end its trading day at 1,268.46. South Korea’s Kospi, on the other hand, closed 2.47% lower at 1,672.44. Oil rose on Tuesday as bargain hunters emerged after recent sharp falls due to the coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession still dragged on the market. U.S. West Texas Intermediate crude rose 51 cents, or 1.6%, to trade at $29.16. Earlier in the session it gained more than $1. Brent crude was unchanged at $30.01 per barrel. Gold prices fell almost 2% on Tuesday, extending losses from the previous session’s meltdown, as investors continued to sell assets to keep their money in cash because of heightened concerns over the economic toll of the coronavirus outbreak. Autocatalyst metals platinum and palladium rose more than 5% each in early trade before paring gains. The metals were the worst hit in Monday’s free fall since they are also considered industrial metals. Spot gold fell 2.7% to $1,472.36 per ounce, having slumped as much as 5.1% on Monday to its lowest since November 2019. U.S. gold futures lost 1% to $1,472. “This is just a continuing trend of gold positions being liquidated as equity markets collapse. There is a trend towards holding cash in the market and that’s being reflected in gold,” said Jeffrey Halley, a senior market analyst at OANDA. “With the meltdown in asset markets, it’s clear that longer-term gold, silver and palladium holders are liquidating profitable positions to cover losses elsewhere.”