Market Insights 2/24/2020

Equities around the world fell sharply today as more cases of the deadly coronavirus were announced in Italy, South Korea and Iran.

Treasuries and gold were much higher in the flight-to-safety. The U.S. dollar gained ground versus most of its major peers, but gains in the U.S. Dollar Index were contained by losses versus the greenback’s fellow safe-haven, the Japanese yen. Oil fell sharply with equities.

The Markets…

The Dow Jones Industrial Average tumbled 1,032 points (3.6%) to 27,961

The S&P 500 fell 107 points (3.2%) to 3,231

The NASDAQ dropped 355 points (3.7%) to 9,221

1.2 billion shares were traded on the NYSE and 3.1 billion shares changed hands on the NASDAQ

WTI oil shed $1.95 to $51.43 per barrel and wholesale gasoline was down $0.04 to $1.61 per gallon

The Bloomberg gold spot price added $27.80 to $1,676.60 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was slightly higher at 99.30

Yields fall as risk aversion persists, Texas manufacturing output modestly returns to growth

The February Dallas Fed Manufacturing Index moved back into expansion territory (a reading above zero), rising to 1.2 from -0.2 in January, above the Bloomberg expectation of 0.0. Production jumped, along with unfilled orders, but expansion in new orders decelerated and employment contracted slightly.

Treasuries gained solid ground, with the yield on the 2-year note falling 11 basis points to 1.25%, the yield on the 10-year note down 11 bps to 1.36% and the 30-year bond rate dropping 9 bps to 1.83%.

This week, along with the retail sector beginning to put the finishing touches on earnings season, the economic calendar will bring a host of data, but mostly pre-virus outbreak reads such as January new home sales, the first revision to Q4 GDP, January durable goods, and January personal income and spending.

Global markets selloff as well

European and Asian equities plunged alongside the U.S. after South Korea announced that it raised its alert to the highest level and while Iran and Italy have seen a noticeable increase in cases.

The euro nudged higher versus the U.S. dollar, the safe-haven Japanese yen gained ground on all its major peers, and the British pound traded lower in comparison to the U.S. dollar. Global bond yields were lower with the notable exception coming from Italy where the risk-off tenor of the day sent the 10-year yield nearly 6 basis point higher.

The concerns regarding the virus outbreak overshadowed a much stronger-than-expected read on German business sentiment for February, which showed the expectations component surprised noticeably to the upside.

The selloff was the worst in Europe. The U.K. FTSE 100 Index dropped 3.3%, France’s CAC-40 Index fell 3.9%, Spain’s IBEX 35 Index tumbled 4.1%, Germany’s DAX Index decreased 4.0%, Switzerland’s Swiss Market Index declined 3.6%, and Italy’s FTSE MIB Index plunged 5.4%. Stocks in Asia were also lower, led by a 3.9% drop for South Korea’s Kospi Index.

Markets in Japan were closed for a holiday. China’s Shanghai Composite Index declined 0.3% and the Hong Kong Hang Seng Index traded 1.8% lower. Australia’s S&P/ASX 200 Index fell 2.3% and India’s S&P BSE Sensex 30 Index declined 2.0%.