Plus, confirmed cases of COVID-19 have surpassed 100,000, February jobs numbers were stronger than expected, and Costco saw a double-digit sales boost in the last week of February.
Stocks fell sharply to start Friday with the Dow dropping 764 points at the open. The S&P 500 fell 2.5%, while the Nasdaq sank 2.8%.
Friday morning’s declines extend a deep rout for stocks, adding to the Dow’s 969-point loss from Thursday’s session and ending what has been a roller coaster week on Wall Street. “It’s an insane market,” said S&P Global Ratings’ Shaun Roache, while Sequoia Capital called the coronavirus “the black swan of 2020” in a memo and cautioned that “we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out.” And according to Allianz Global Investors portfolio manager Mike Riddell, markets aren’t prepared for how severe the fallout from the spread of the coronavirus could be. “The speed of the market repricing has obviously been dramatic, however markets have only gone from pricing in no risk of anything to a moderate risk,” Riddell, who oversees $4.7 billion for Allianz, said. “Where we think markets can still move is in volatility. …Even if we aren’t hysterical about the health impact of the virus, it doesn’t mean the market and economic impact is going to be muted. It is the quarantining and essentially the shutting down of large parts of the global economy which is causing substantial economic and financial market damage. My base case is things get substantially worse from now.”
Global confirmed cases of COVID-19 surpassed 100,000 overnight, with global deaths from the virus rising to at least 3,383. The U.S. has at least 233 cases, while the CDC has confirmed at least 14 deaths. The World Health Organization called on all countries to “pull out all the stops” to fight the coronavirus outbreak. “This epidemic can be pushed back but only with a coordinated and comprehensive approach that engages the entire machinery of government,” said WHO Director-General Tedros Adhanom Ghebreyesus during a press conference. “We’re calling on every country to act with speed, scale and clear-minded determination.” President Trump signed the $8.3 billion emergency coronavirus spending bill expedited through the House and Senate this morning, pumping much needed funds into prevention and research efforts as well as containment efforts.
Investors’ flight to safety pushed the yield on the 10-year Treasury note to a record low of 0.676% early this morning, with the yield recovering slightly to 0.767% at the time of writing. The yield on the 30-year Treasury also hit a fresh record low of 1.259%. “It’s a brave new world of 0-handles and we’ve now taken to referencing 10-year yields in basis point terms. 1.0%, thanks for the memories,” said Ian Lyngen, head of rates strategy at BMO Capital Markets. “The ‘great repricing’ continues, encouraged by falling equity prices and reports that coronavirus infections” have surpassed 100,000 globally, Lyngen added. “The economic implications are still unknowable at present, even if the logic that ‘the longer the global shutdown continues the deeper the impact’ resonates among market participants.”
Nonfarm payrolls grew more than expected in February, with the Labor Department reporting this morning that the U.S. economy added 273,000 new jobs last month. “We can of course throw all of this data out the window as everything resets in light of what’s now going on” with the coronavirus, said Peter Boockvar, chief investment officer at Bleakley Advisory Group. While economists agree that the February jobs report reflected a healthy labor market heading into the coronavirus outbreak, Oxford Economics’ U.S. economist Lydia Boussour noted that the “strong employment and steady wage gains have boosted consumers’ immune system, [but] the virus is all but certain to infect their willingness to spend. Cautious businesses, weary workers and the absence of coordinated policy responses will weigh on job growth” in the second half of the year, she added.
And Costco reported stronger sales than expected after the bell yesterday as shoppers stocked up on supplies to prepare for a more widespread outbreak of the new coronavirus. “February sales benefited from an uptick in consumer demand in the fourth week of the reporting period,” Costco said in a statement. “We attribute this to concerns over the coronavirus.” The wholesale retailer said that the outbreak boosted same-store sales by 12.1% for the week ended March 1 and overall monthly same-store sales by 3%. “Costco’s defensive positioning makes it a name to own in a volatile tape,” wrote Gordon Haskett analyst Chuck Grom in a research note from Friday. “We believe its ability to also play offense with a relentless focusing on driving the top line [sales] makes Costco a long-term winner in the retail space.”
Stocks We’re Watching
Vipshop Holdings (NYSE: VIPS): Vipshop shares jumped as much as 30% yesterday after the Chinese e-commerce specialist reported solid fourth-quarter earnings. The company reported fourth quarter earnings per share of $0.41 on revenue of $4.21 billion, beating estimates for earnings per share by $0.10 and for revenue by $220 million. Vipshop CEO Eric Shen did caution that the coronavirus outbreak had impacted the company’s sales in the first quarter of 2020. “We are working closely with our suppliers to get through this difficult time together,” Shen said on the earnings call. “The good news is, we have seen some signs of recovery in March and believe customers’ demand will rebound quickly once the virus is contained. We continue to have full confidence in the strength of Chinese economy and the long-term growth potential in China’s discount retail market.”