Market Insights 3/9/2020

U.S. equities finished sharply lower after resuming trading following a triggered fifteen minute halt nearly right after the U.S. markets opened, as dysfunction on the energy front added another layer of volatility to stymie conviction that has already been elevated amid the accelerated uncertainty regarding the earnings and economic impact of the spreading coronavirus outbreak.

More cases in the U.S. have been reported and Italy has deployed aggressive containment measures, while the energy sector’s turmoil was exacerbated by Saudi Arabia launching an oil price war on the heels of last week’s failed production cut proposal by OPEC that Russia rejected.

Treasury yields plunged, with the entire yield curve falling below 1.0% for the first time in history during the day, and the U.S. dollar fell, as expectations that the Fed will deploy further rate cuts and potential extraordinary measures have increased as well as the possibility of government fiscal stimulus actions to combat the impact.

Gold traded slightly higher. Overseas, both Europe and Asia finished with widespread losses.

The Markets….

The Dow Jones Industrial Average dove 2,013 points (7.8%) to 23,851

The S&P 500 Index lost 226 points (7.6%) to 2,746

The Nasdaq Composite plummeted 625 points (7.3%) to 7,951

In heavy volume, 2.1 billion shares were traded on the NYSE and 4.5 billion shares changed hands on the NASDAQ

WTI crude oil plunged $10.15 to $31.13 per barrel and wholesale gasoline was down $0.25 to $1.14 per gallon

The Bloomberg gold spot price was up $3.40 to $1,677.23 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—dropped 1.0% to 94.95

Rally in Treasury markets shifts into a higher gear as global market turmoil hits a new level

Treasuries saw the recent rally accelerate as the global markets continue to experience heightened volatility, as the yield on the 2-year note fell 11 basis points (bps) to 0.39%, the yield on the 10-year note dropped 13 bps to 0.58%, and the 30-year bond rate tumbled 17 bps to 1.05%.

Bond yields cratered, with the entire yield curve falling below 1.0% intraday for the first time in history. The markets responded to the shock in the oil markets, the intensified spreading of the coronavirus across the globe, and increased expectations that the Federal Reserve will deploy further rate cuts and possibly extraordinary measures. This morning, the New York Federal Reserve announced that it will increase the amount of money it is offering to banks for their short-term funding needs.

Stocks in Europe and Asia tumble as global market selloff intensifies

European equities fell sharply, with the global markets accelerating the recent selloff to begin the week as an oil price war applied further pressure on conviction, joining the accelerating spreading of the coronavirus and the expected increased response from central banks around the globe. Bond yields dropped to new lows, with the entire yield curve in the U.S. south of 1.0% for the first time in history, while the euro and British pound rose versus the U.S. dollar.

The U.K. FTSE 100 Index was down 6.5%, France’s CAC-40 Index was off 7.7%, Germany’s DAX Index tumbled 7.4%, Spain’s IBEX 35 Index fell 7.6%, Italy’s FTSE MIB Index plunged 9.7%, and Switzerland’s Swiss Market Index traded 5.1% lower.

Stocks in Asia dropped broadly to begin the week, with OPEC’s proposed production cut last week that was rejected by Russia sparking an oil price war and adding another layer of market turmoil as Saudi Arabia said it plans to boost oil output.

The intensified spreading of the coronavirus, with Italy announcing aggressive containment measures and cases in the U.S. continuing to rise, applied further fuel to the flight to safety, which boosted the Japanese yen.

Japan’s Nikkei 225 Index tumbled 5.1% and Australia’s S&P/ASX 200 Index plunged 7.3%, while India’s S&P BSE Sensex 30 Index dropped 5.2%. China’s Shanghai Composite Index fell 3.0%, the Hong Kong Hang Seng Index slid 4.2%, and South Korea’s Kospi Index dropped 4.2%.