In the early hours of the 7th, Beijing time, U.S. stocks closed lower on Friday. The main stock index pulled up late in the session and closed at its lowest level, with the Dow closing down more than 250 points. The number of new coronavirus infections worldwide exceeds 100,000. Investors are concerned about the potential for an outbreak to hit the world economy hard. U.S. WTI crude oil plunged more than 10 percent. Yields on 10-year U.S. debt are at record lows. Non-farm data for February were strong.
The Dow closed down 256.50 points, or 0.98 per cent, at 25,864.78, the Nasdaq lost 162.98 points, or 1.86 per cent, to 8,575.62 and the Standard and Poor’s 500 index was down 51.57 points, or 1.71 per cent, at 2,972.37.
U.S. stocks came out on a roller-coaster ride this week amid concerns about the outbreak and its impact on the global economy, the Federal Reserve’s emergency interest rate cut, the U.S. presidential primary and some important economic data. Major stock indexes have been volatile during the week, with the Dow rising more than 1,100 points on Monday and Wednesday, and both recorded sharp declines on Tuesday and Thursday. U.S. stocks continued to wobble Friday.
U.S. stocks recorded gains this week. By Friday’s close, the Dow was up 1.77 percent for the week, the S.P. 500 was up 0.59 percent and the Nasdaq was up 0.1 percent. But the three major indexes are still in the correction zone, down more than 10 per cent and less than 20 per cent from their recent highs.
U.S. Treasury yields continued to fall on Friday, with 10-year yields hitting record lows. Treasury bonds are considered one of the safest assets in the world. Treasury bonds were sought after and Treasury yields fell amid uncertainty over the economic outlook.
U.S. WTI crude closed down more than 10 percent on Friday. U.S. energy stocks fell across the board, with Exxon Mobil down 4.81 percent, Chevron down 4.93 percent, Schlumberger down 7.63 percent and EOG Energy down 10.64 percent.
U.S. economic adviser Kudlow: U.S. stocks plunge just in time for low buying
Larry Kudlow, Us President Donald Trump’s chief economic adviser, said on Friday that U.S. stocks had fallen sharply recently, but investors should not overreact, there could be good investment opportunities and Americans should buy low when it comes to stock market investments.
“Long-term investors should seriously consider buying stocks at low prices, ” mr Kudlow said. He thinks it’s a smart investment strategy because the U.S. economy is “robust” despite the recent sharp decline in the market and fears that the coronavirus could lead to a recession.
Mr. Kudlow said U.S. economic growth is expected to slow in the second quarter and possibly slow in the third quarter. If global demand is high, the Fed should provide more dollars. The U.S. bond market is likely to show expectations of the Fed’s policies. Or may seek more stimulus from Congress.
New coronavirus confirmed over 100,000 Moody’s says global recession risk increases
At present, the number of confirmed cases of new coronavirus infection worldwide has exceeded 100,000 and 3383 deaths have been reported. According to Reuters, there are more than 100,000 new coronavirus infections worldwide. According to Xinhua News Agency, the latest real-time statistics released by Johns Hopkins University in the United States show that as of 8 am ET (6:00 PM BEIJING time), the number of confirmed cases of new coronary pneumonia worldwide exceeded 100,000, reaching 100,113 cases.
Fears of a global outbreak of new coronary pneumonia have intensified, confirmed cases in Europe have surged, and outbreaks in Japan, South Korea and Iran are likely. Analysts believe that the market is worried that the global crisis will hit the economic outlook, leading to panic selling by investors.
The rapid spread of the new corona virus around the world has put pressure on risky assets, and safe-haven assets such as government bonds and gold are being sought after. Yields on 10-year U.S. debt fell to record lows, reflecting growing concern that contagion could hit global growth hard.
Moody’s said Friday that the spread of the new coronavirus outbreak has increased the risk of a global recession. “For the US, we now expect real GDP growth to be 1.5 per cent in 2020, down from the 1.7 per cent previously forecast,” Moody’s said. “
“The rate of new coronavirus infections is multiplying and more states in the United States have declared a state of emergency,” Tom Di Galoma, managing director of bond trading at Seaport Global Securities, wrote in Friday’s report. “
Trump signs $8.3 billion emergency spending bill, calls on Fed to act again
Trump signed an $8.3 billion emergency coronavirus spending bill on Friday. “I don’t know if there needs to be a stimulus,” Mr. Trump said. The Fed should cut interest rates and take stimulus measures. Financial markets are expected to rebound. “
Esther George, president of the Kansas City Fed and one of the Fed’s most hawkish policymakers, said the impact of quantitative easing posed a risk to stability and the economy, and asset purchases could trigger financial imbalances.
Some economists and strategists also agree that monetary policy instruments such as interest rates may do little to help the global economy withstand the impact of the coronavirus.
“The idea is deeply rooted in financial markets that when the global economy is in a deep downturn, central banks will save the economy by slashing interest rates, ” said Nomura analysts. Even if the coronavirus-induced recession is different from other situations, the market is looking forward to the same policy action. “
Nomura analysts point out that the current economic downturn is not caused by financial factors such as asset prices exceeding fundamentals, but by the spread of a new virus, so “the most important and best emergency response measures, the first step in health and safety policy.”
Markets expect Fed to cut rates again in mid-March
The global spread of the new corona virus epidemic poses a serious threat to the outlook for economic growth, forcing some central banks, including the Federal Reserve, to cut benchmark interest rates. On Tuesday, the Federal Reserve cut its target federal funds rate by 0.5 percentage points, bringing its benchmark federal funds rate to 1-1.25 percent, the first emergency cut by the U.S. central bank since the 2008 financial crisis. The market expects another rate cut at the Federal Reserve’s March 17-18 meeting. At its next meeting in two weeks, the fed has a chance of cutting interest rates by another 50 basis points, according to the CME FedWatch tool.
Late Thursday, Dallas Fed President Rob Kaplan said the new coronavirus outbreak could last three to five months, but he was optimistic that the U.S. would not be in recession because of the outbreak.
“I still believe that the United States will be able to get through this year, ” Mr Kaplan said. Kaplan is a voting member of the Federal Open Market Committee (FOMC) this year. The FOMC will hold a monetary policy meeting on March 17-18.
But some question the Fed’s ability to curb the potential economic damage of the fast-spreading deadly virus.
“We disagree with the Fed statement that ‘the central bank still has room to deal with the crisis,'” said George Saravelos, head of global foreign exchange research at Deutsche Bank. “
February nonfarm payrolls data strong, not shaking market expectations for Fed rate cut
On the economic front, the Labor Department reported that New nonfarm payrolls in the U.S. recorded 273,000 jobs in February, up from a previous reading of 225,000 (revised to 273,000) and a market forecast of 175,000. The U.S. unemployment rate was 3.5 percent in February, compared with 3.6 percent in the previous and expected periods. Average hourly earnings grew by 3% year-on-year.
U.S. companies maintained a strong hiring pace in February, giving the economy a big boost, as u.S. wage growth grew steadily, workers worked more hours and the unemployment rate fell further from last month to a near 50-year low.
Despite the strong February non-farm data, it did not shake expectations of a Rate cut by the Federal Reserve. After the non-farm payrolls data was released, the market expects the Fed to cut interest rates by another 50 basis points at its March 18 meeting and to continue cutting rates by 25 basis points at its April meeting. Overall, the market expects the Fed to cut interest rates three more times this year, totalling 75 basis points.
U.S. bank stocks such as JPMorgan Chase, Morgan Stanley, UBS and Deutsche Bank were broadly lower.
Oil stocks such as BP, Chevron and Exxon Mobil fell sharply.
Gold stocks rose, while Barrick Gold, Gold Rose Gold and Hamoni Gold all rose.
Deutsche Bank cut Apple’s target price to $295 from $395. The bank also raised AMD’s target price to $50 from $42.
Starbucks expects the virus outbreak to reduce its second-quarter revenue in China by $40.43 billion.
Tesla shares are lower. Recently, media reports said it was exaggerating revenue by cutting warranty costs.
Intel has lagged behind TSMC and Samsung in chip technology, according to media reports, and Intel executives have now publicly acknowledged this.
Other markets: International crude oil plunges U.S. oil by more than 10%
In Asia on Friday, the Shanghai Composite Index closed down 1.2 per cent, while the CSI 300 index closed down 1.6 per cent. Tokyo’s Nikkei 225 index closed down 2.2 percent. South Korea’s Kospi index closed down 2.2 percent.
In Europe, Europe’s pan-European Index 300 closed down 3.67 per cent, Britain’s FTSE 100 closed down 3.5 per cent, Germany’s DAX closed down 3.3 per cent, France’s CAC closed down 4.0 per cent and Spain’s IBEX closed down 2.7 per cent.
Gold futures for April delivery rose $4.40, or 0.3 percent, to $1,672.40 an ounce on the New York Mercantile Exchange, after rising as high as $1,690.70 an ounce.
Gold rose $105.70, or 6.79 percent, this week, its biggest weekly gain in dollars and percentages since 2011.
Silver for May delivery fell 13 cents, or 0.7 percent, to close at $17.263 an ounce. Silver rose 4.89 percent this week on the most active contract.
West Texas Intermediate (WTI) futures for April delivery fell $4.62, or 10.1 percent, to close at $41.28 a barrel on the New York Mercantile Exchange, the lowest close since November 28, 2014.
Brent crude for May delivery fell $4.72, or 9.4 percent, to $45.7 a barrel on the London-based Intercontinental Exchange, its lowest close since June 22, 2017.
WTI crude closed down 7.8 percent and Brent crude closed down 8.9 percent.