Stocks fell Wednesday, signaling more selling after the Dow posted its worst quarterly drop since 1987.
In the U.S., officials’ outlooks around the coronavirus outbreak have grown increasingly somber, as the case count topped 189,000 – comprising around one-fifth of known global cases – and the death toll rose about 3,000. During a White House briefing Tuesday evening, President Donald Trump said Americans should prepare for what is going to be “a very painful two weeks” as the pandemic paces toward a peak in the U.S. Based on new White House projections, the death toll could reach up to 240,000 domestically.
Each of the three major indices suffered stunning declines during the first three months of this year as the coronavirus outbreak escalated globally, triggering widespread stay-at-home orders, effectively shutting down travel-related industries and grinding a myriad other business operations to a halt.
As of market close Tuesday, the S&P 500 was down 20% for the year to date, the Dow fell 23.2% and the Nasdaq dropped 14.18%, with the latter’s declines cushioned relative to the other indices as investors bought into big tech names. The Information Technology sector was the leader in the S&P 500 for the first quarter, followed by the Health-Care sector.
The Energy sector, meanwhile, was the S&P 500’s biggest laggard, dropping 51% for the year to date. This coincided with a precipitous decline in crude oil prices, with domestic West Texas Intermediate posting its single largest quarterly and monthly declines on record, settling more than 66% lower for the year to date on Tuesday. Saudi Arabia has vowed to hike its oil output to a record in April, further applying downward pressure to prices on the supply side while the coronavirus simultaneously drags down energy demand.
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12:37 p.m. ET: Stocks hold near session lows
The S&P 500 was near its lowest point of the session after noon in New York, as renewed selling overtook the domestic equity market.
Here were the main moves in markets, as of 12:37 p.m. ET:
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S&P 500 (^GSPC): -102.18 points (-3.95%) to 2,482.41
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Dow (^DJI): -808.32 points (-3.69%) to 21,108.84
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Nasdaq (^IXIC): -269.1 points (-3.49%) to 7,430.20
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Crude (CL=F): -$0.20 (-0.98%) to $20.28 a barrel
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Gold (GC=F): +$7.20 (+0.45%) to $1,603.80 per ounce
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10-year Treasury (^TNX): -9.2 bps to yield 0.607%
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12:04 p.m. ET: ‘I need to see stress in the credit markets ease’ before calling a market bottom, strategist says
As the coronavirus outbreak forces many businesses to halt operations, draw down their credit lines and scramble for capital, at least one strategist said the credit market will provide the first signal of whether the market has hit its bottom and is heading toward a recovery.
“I need to see the stress in the credit markets ease, particularly in the high yield,” Quincy Krosby, chief market strategist for Prudential Financial, told Yahoo Finance’s The First Trade Wednesday.
In March, more than $92 billion in debt was downgraded to high yield from investment grade among 11 companies, according to CreditSights data cited by Bloomberg. The rating declines largely reflected a deterioration in companies’ abilities to generate cash as large swaths of the world abide by stay-in-place orders. And as ratings go down, capital can become more inaccessible for borrowers. Companies including cruise line operator Carnival and KFC-parent Yum Brands have recently sought to tap into debt markets with massive bond offerings.
“Oil prices are hurting that as well, as a good portion of high yield comes from the energy patch,” Krosby added. “So, the credit markets typically leave and ease things once the stress and the yields come in.”
The Federal Reserve, however, has attempted to help businesses meet short-term funding needs with recent new measures like its special credit facility to purchase corporate paper from issuers, as part of a broader effort to ensure “there’s cash everywhere, in every nook and cranny in the credit markets,” Krosby said.
Krosby said she is also monitoring volatility as measured by the VIX, or the so-called “fear-gauge” for the S&P 500. Wednesday afternoon, the VIX ticked as high as 60.59 before paring some gains. At the start of this year, the VIX was in the low-teens.
“We don’t want to see it move above 60. At these stages with the VIX moving higher, there is a direct positive correlation with the equity market,” Krosby said. “We want that to start moving in the opposite direction.
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10:00 a.m. ET: Institute for Supply Management manufacturing PMI falls to 49.1 in March, but tops expectations
The Institute for Supply Management’s March manufacturing purchasing managers’ index fell into contractionary territory with a reading of 49.1 in March, according to a statement. Consensus economists had expected a steeper drop to 44.5, according to Bloomberg.
In February, the ISM manufacturing PMI had been 50.1, or above the neutral level of 50.0 to indicate expansion in the sector.
Beneath the headline index, the March new orders index dropped 7.6 points to 42.2, reflecting a drop-off in demand for new goods. Indices for production, backlogs of orders and employment each also fell, but by smaller margins. The supplier deliveries index, however, rose 7.7 points from February, helping offset the decrease in the overall PMI.
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9:45 a.m. ET: U.S. manufacturing sector output falls at fastest rate since 2009 and ‘worse is likely to come,’ according to IHS Markit
Manufacturing activity contracted in March by the fastest pace since August 2009 as the COVID-19 outbreak dampened demand and led to the steepest drop in production and new orders in the sector since the financial crisis, IHS Markit said in its final monthly report Wednesday.
The headline manufacturing purchasing managers’ index (PMI) fell to 48.5 in March, versus the 48.0 expected, according to Bloomberg-compiled data. Readings below the neutral level of 50.0 indicate contraction in a sector.
The March PMI was earlier reported as 49.2 in the advance print, which had already represented a decline into contractionary territory after February’s PMI of 50.7.
“Growing numbers of company closures and lockdowns as the nation fights the COVID-19 outbreak mean business levels have collapsed,” Chris Williamson, chief business economist for IHS Markit, said in a statement. “While some producers reported being busier as a result of stockpiling and anti-virus activities, notably in the food and healthcare sectors, these are very much the minority, and most sectors reported a rapid deterioration in demand and production.”
“Orders for capital equipment have deteriorated at a rate not seen since data were first available in 2009 as firms stopped investing in machinery,” he added, noting that households have also curbed spending on non-essential items. “With export sales also sliding, factories are facing a broad-based slide in demand which is already resulting in the largest job losses recorded since the global financial crisis.”
“Worse is likely to come as consumer spending falls further in coming months as lockdowns intensify and unemployment spikes higher,” Williamson said.”
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9:31 a.m. ET: Stocks open lower, Dow drops 850 + points
Stocks fell Wednesday morning, extending Tuesday’s declines as the Dow shed more than 800 points just after market open.
The Real Estate, Financials and Energy sectors led declines in the S&P 500, each dropping more than 5%. In the Dow, Boeing and Dow Inc. posted the steepest losses.
Here were the main moves in markets, as of 9:31 a.m. ET:
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S&P 500 (^GSPC): -95.71 points (-3.7%) to 2,488.88
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Dow (^DJI): -851.95 points (-3.89%) to 21,065.21
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Nasdaq (^IXIC): -236.43 points (-3.07%) to 7,463.67
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Crude (CL=F): -$0.04 (-0.2%) to $20.44 a barrel
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Gold (GC=F): -$4.00 (-0.25%) to $1,592.60 per ounce
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10-year Treasury (^TNX): -10.3 bps to yield 0.596%
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8:15 a.m. ET: Private payrolls declined by 27,000 in March as small businesses shed jobs, according to ADP/Moody’s report
Private payrolls fell less than expected in March, according to the ADP/Moody’s monthly report capturing the early impacts of the coronavirus outbreak on the domestic labor market.
Headline private payrolls sank by 27,000, beating expectations for a decline of 150,000, according to Bloomberg-compiled consensus data. in February, private payrolls rose by 179,000, downwardly revised from the 183,000 previously reported.
The ADP/Moody’s survey collects data through the 12th of the month, and so does not fully capture the most recent impacts to the job market caused by the coronavirus outbreak and related social distancing measures.
By company size, small businesses bore the brunt of declines in March, with companies of up to 49 employees losing 90,000 payrolls. Medium and large business each posted net gains in payrolls.
Both the goods-producing and services sectors saw net job losses in March, with the services sector leading declines. Trade, transportation and utilities industries lost 37,000 jobs, and administrative services lost 12,000 payrolls. In the goods-producing sector, construction lost 16,000 jobs.
Small businesses lost 90,000 jobs in March, according to ADP/Moody’s.
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8:00 a.m. ET: Home Depot announces early store closures, expanded COVID-19 safety measures
The Home Depot (HD) became one of the latest major retailers to announce operational changes amid the coronavirus outbreak. The company said Wednesday morning it will shrink its store hours and close at 6 p.m. daily to give staff “additional time to perform cleaning and restock shelves.” Store associates will take their temperatures before work, it added.
The company also said it is limiting the number of customers inside at any given time, and eliminating spring promotions to avoid incentivizing more shoppers into retail locations. The company froze prices nationwide on products in high demand due to the coronavirus outbreak, and is prioritizing fulfillment to health-care centers and personnel.
Home Depot also said it is expanding its paid time off policy for workers to accommodate disruptions due to the coronavirus, and is implementing a temporary bonus program for workers in stores and distribution centers.
Shares of Home Depot fell 3.8% in early trading to $179.55 each.
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7:09 a.m. ET Wednesday: Stock futures drop, Dow sheds 600+ points
Here were the main moves in markets, as of 7:09 a.m. ET:
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S&P 500 futures (ES=F): down 3.19%, or -82 points to 2,487.75
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Dow futures (YM=F): down 3.14% or -682 points to 21,069.00
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Nasdaq futures (NQ=F): down 2.74% or -213 points to 7,573.25
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Crude (CL=F): +$0.49 (+0.49%) to $20.58 a barrel
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Gold (GC=F): +$10.00 (+0.63%) to $1,606.60 per ounce
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10-year Treasury (^TNX): -8.9 bps to yield 0.61%
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7:00 a.m. ET Wednesday: Mortgage applications jumped last week as refinances surge, but new purchases extended declines
Mortgage applications jumped by a seasonally adjusted 15.3% over the prior week for the week ending March 27, the Mortgage Bankers Association (MBA) said Wednesday. This came following a 29.4% weekly drop for the week ending March 20.
The MBA’s index tracking refinances surged 26% from the previous week and was more than double that of the comparable period last year. Purchases, however, decreased 10% compared with the previous week, and 24% compared to the same week last year.
“Mortgage rates and applications continue to experience significant volatility from the economic and financial market uncertainty caused by the coronavirus crisis. After two weeks of sizable increases, mortgage rates dropped back to the lowest level in MBA’s survey, which in turn led to a 25 percent jump in refinance applications,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “The bleaker economic outlook, along with the first wave of realized job losses reported in last week’s unemployment claims numbers, likely caused potential homebuyers to pull back.”
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6:01 p.m. ET Tuesday: Stock futures open little changed
Here were the main moves in markets, as of 6:01 p.m. ET:
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S&P 500 futures (ES=F): down 0.47%, or -12 points to 2,557.75
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Dow futures (YM=F): down 0.45% or -98 points to 21,653.00
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Nasdaq futures (NQ=F): down 0.32% or -25 points to 7,761.25
The empty Trading Floor of the NYSE after the market has closed.
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