On Friday, a dizzying and brutal week of trading brought down a final wave of painful swings for investors.
After slipping sharply throughout the day as fear swept through the markets, the sharp declines in stocks and bond yields suddenly slowed in the past hour. By the end of the trade, the S&P 500 had more than halved its daily loss to 1.7% and even blocked a gain for the week.
It was the last jump in a mad rush that rocked stocks between huge gains and losses – mostly losses in the past two weeks. Investors are trying to guess the economic damage that the coronavirus will ultimately inflict, and they are changing from minute to minute as the number of new infections accumulates on the one hand and as central banks and governments offer stimulants. other.
All the uncertainty left the markets in turmoil.
“We can guess at this point why he rallied at the close,” said Adam Taback, chief investment officer of Wells Fargo Private Bank, about the closing hour of Friday’s session.
Earlier today, the S&P 500 was down 4%. Even more alarming was another breathtaking drop in Treasury yields to record lows.
The 10-year Treasury yield drops when investors worry about a weaker economy and inflation, and has dropped below 0.70% at some point. Earlier this week, it had never been below 1% in history. It was 1.90% at the start of the year, before viral fears took hold.
Even a better-than-expected report on jobs in the United States was not enough to keep the markets going. This is generally the most anticipated economic data each month, but investors have looked at February’s solid recruiting numbers as they came before the new coronavirus spread quickly across the country.
“The bond market says that the monster under the bed is much bigger and more frightening than anyone currently expecting it,” said Ryan Detrick, senior market strategist at LPL Financial.
At the heart of the drops is the fear of the unknown. The virus usually only causes mild to moderate symptoms. But because it is new, experts do not know how far it will spread and how much damage it will ultimately cause, both to health and to the economy.
The number of infections has exceeded 100,000 worldwide and businesses are reporting lost revenue. The danger for businesses comes from two sides. On the supply side, for example, Apple has said that slowing iPhone manufacturing in China will hurt sales. On the demand side, an airline group said the epidemic could lose up to $ 113 billion in revenue if people canceled their trips.
Friday’s drop for the S&P 500 was the last swing in a remarkably turbulent week. It started with a jump of 4.6% on Monday, then fell 2.8%, rose 4.2% and fell 3.4%.
“At this point, no one can really explain why the markets behave the way they do, and what may be next,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The only thing we can say is that this high volatility is bad.”
Just two weeks ago, the S&P 500 set a record on February 19. It has lost 12.2% since then.
The bond market sounded the alarm about the effects of the virus well before the stock market, and yields fell again on Friday.
The Fed surprised the market earlier this week by cutting interest rates by half a percentage point. Investors expect other central banks around the world to follow suit in hopes of supporting the markets.
President Donald Trump signed the $ 8.3 billion coronavirus response bill on Friday.
Eric Rosengren, president of the Boston Federal Reserve Bank, said Friday that the Fed may start using new tools to fight a recession, such as buying a wider range of financial assets.
At the same time, doubts are high about the effect that lower rates can have. Cheaper loans can encourage people and businesses to make big purchases, but they can’t bring workers back to factories if they’re quarantined.
A boost for stocks came earlier this week after Congress agreed to an $ 8.3 billion coronavirus bill that President Donald Trump signed on Friday. But investors say an economic downturn seems inevitable, and many analysts expect sharp market swings to continue as the number of new cases picks up.
“As the market tries to find its bottom, it will go up and down, up and down, until it has a reason to change regularly one way or the other,” said Taback of Wells Fargo Private Bank.
MARKET OVERVIEW:
The S&P 500 fell 51.57, or 1.7%, to 2,972.37. It increased by 0.6% over the week.
The Dow Jones Industrial Average lost 256.50, or 1%, to 25,864.78. The Nasdaq fell 162.98, or 1.9%, to 8,575.62.
The 10-year Treasury yield fell to 0.77% from 0.92% on Thursday evening. It rallied 0.66% earlier today, according to Tradweb.
US benchmark crude oil fell $ 4.62, or 10.1%, to $ 41.28 per barrel. It was the worst day for oil in over five years. Brent crude, the international standard, fell $ 4.72, or 9.4%, to $ 45.27.
In Europe, the French CAC 40 fell by 4.1% and the German DAX by 3.4%. The FTSE 100 in London fell 3.6%.
The Nikkei 225 in Japan lost 2.7%, the Kospi in South Korea lost 2.2% and stocks in Shanghai were down 1.2%.
Gold rose $ 4.40 to $ 1,672.40 an ounce. Silver fell 13 cents to $ 17.26 an ounce and copper slipped 1 cent to $ 2.56 a pound.
Wholesale gasoline fell 13 cents to $ 1.39 per gallon, heating oil fell 10 cents to $ 1.39 per gallon and natural gas lost 6 cents to $ 1.71 per 1,000 cubic feet.