Panic Selling Sends Equities Down 10%
The U.S. futures are indicating a sharply lower open on Monday morning as panic begins to grip the market. The futures all fell more than 5.0% triggering circuit breakers that only allow trades above the -5.0% cutoff limit. The SPY, an ETF that tracks the broad market S&P 500, becomes a better gauge of the market in this circumstance, it is down about -9.0%. At this level the SPY will trigger a 15-minute pause at the open, if it falls more than -10% it will trigger another circuit breaker.
The fall is due to the coronavirus. The number of cases has risen to near 170,000 globally with rising death tolls worldwide. There are now 3,775 cases in the U.S. with 69 dead. Large portions of the U.S. economy are being shut down in an effort to contain the spread. States of emergency exist at the national and state levels that include a shut down of most public school systems. Shortages exist in many product verticals as prepping and hoarding for an extended period of “social distancing” begins.
The threat to global economies is very real and highlighted by moves made by several central banks in the overnight session. The FOMC began with another emergency preemptive rate cut, this time over 100 bps, bringing the U.S. benchmark to 0.0%. This is the lowest level since 2015 and includes the resumption of $700 billion in QE purchases. The Bank of Japan and RBA both engaged stimulus efforts following the move.
The IMF made headlines this morning. The IMF says it will make it’s $1 trillion loan capacity available to aid ailing nations during the crisis. Market activity perked up on the news but did not sustain a rebound. Futures were back to the lows of the session soon afterward. On the economic front, the Empire State Manufacturing Survey came in at -21.5 for March and the lowest level since 2009. Analysts had expected a reading closer to 3.5.
Stocks On The Move
Shares of Apple are down -11.0% but not the hardest hit. Apple says it will close all of its U.S. stores to fight viral impact. The company estimates its China closures could impact revenue by 10% in the 1st quarter. This shut down could impact revenue another 10% over the course of the 1st and 2nd quarters this year. Airlines are falling the worst, down -10% to -15%, after capacity schedules were slashed.
Later this week traders will be looking for some important EPS announcements from retailers as well as retail sales figures. Reports are due from consumer staples giant General Mills as well as a host of retailers. Guess, Five Below, Cato and Tiffany are likely to report misses and give negative virus-related guidance.