Plus, stocks’ volatile week continues, oil crashed to 18-year lows, and Apple announced new products.
Stocks traded lower to start Wednesday with the Dow dropping 1,400 points, or more than 6.5%. The S&P 500 has fallen 6.1%, while the Nasdaq is down nearly 5%.
The market has been on an unprecedented roller-coaster ride amid the coronavirus outbreak, with the S&P 500 swinging 4% or more in either direction for seven consecutive sessions. The index is now more than 29% down from its record high reached last month. Dow futures again hit their “limit down” level in premarket trading. The Treasury market is also seeing some extreme moves with the 10-year Treasury yield rising 12 basis points to 1.226% to its highest level since February 28 and extending its reversal since Monday when it traded at just 0.65%. The yield on the 30-year Treasury bond rose 11 basis points to 1.684%. The flight from long-term debt came this week as the White House floated a $1 trillion economic stimulus package to help boost the economy, which appears to be on track for a recession. “When you decimate the restaurant industry, the travel industry, the hotel industry, the airline industry, the cruise line industry, obviously you’re going to take a huge divot out of economic activity,” said DoubleLine Capital CEO Jeffrey “Bond King” Gundlach, adding that he sees a 90% chance the U.S. will enter a recession before the year is out.
Speaking of stimulus, the White House and Congress are scrambling to nail down the details of the Trump administration’s proposed $1 trillion spending bill, even as the Senate has yet to pass the second relief bill passed by the House late last week. The new bill could include direct payments of $1,000 to individuals in the U.S., small business lending, payroll tax cuts, and credit facilities for larger businesses and commercial paper facilities. Separately, the Trump administration is also seeking $45.8 billion in additional funding from Congress to cover “unanticipated” costs for agencies responding to the coronavirus crisis. Acting Director of the Office of Management and Budget Russell Vought said in a letter to congressional leaders that the additional funds will be used “to address ongoing preparedness and response efforts,” adding that “these costs must be met with a legislative response to ensure full operational capacity.” And finally, Treasury Secretary Steven Mnuchin said that taxpayers will get a three-month reprieve to pay their income taxes for 2019 as part of the federal government’s coronavirus response, and will not be subject to interest and penalties during that three month reprieve. As for Americans who expect to receive a refund, Mnuchin encouraged them to continue to file and that refunds would continue to be sent out promptly. “We encourage those Americans who can file their taxes to continue to file their taxes on April 15,” Mnuchin said. “Because for many Americans, you will get tax refunds.”
Cases of the coronavirus surged past 201,000 globally overnight, doubling in two weeks, while cases in the U.S. have risen to at least 6,496. Analysts from the Economist Intelligence Unit (EIU) said in a note that COVID-19 is likely to infect half of the global population. “We assume that the virus will infect around 50% of the world population; 20% of the cases will be severe, and 1-3% will result in deaths,” the EIU analysts wrote. As a result of the pandemic, the EIU believes global growth will slow to just 1% for 2020, down from its outlook for growth of 2.3% before the outbreak began. In other news, researchers from the National Institutes of Health, Centers for Disease Control and Prevention, UCLA, and Princeton University found that COVID-19 can survive in air particles for for up to three hours, and for between several hours to several days on surfaces including copper, cardboard, plastic, and stainless steel. And President Donald Trump said this morning that the United States will temporarily close its border with Canada to “non-essential traffic” due to the coronavirus epidemic. “We will be, by mutual consent, temporarily closing our Norther Border with Canada to non-essential traffic,” Trump tweeted. “Trade will not be affected.”
Oil plummeted 16% to an 18-year low Wednesday after Saudi Arabia doubled down in its price war with Russia vowing to keep production at a record high “over the coming months,” and as the coronavirus pandemic continues to weaken demand and as concerns about a global recession sparked fears of longer-term demand destruction. At the time of this writing, West Texas Intermediate Crude has fallen to $22.67, while Brent Crude has slipped down to $25.98. “Saudi Arabia has decided to flood the market with oil as it pushes for market share by ramping up production to maximum levels,” said Energy Aspects Ltd. chief oil analyst Amrita Sen. “We see no easy way for Saudi Arabia or Russia to back down from their current positions.”
Apple announced a new iPad Pro and MacBook Air this morning in a press release. Apple stores are closed around the world until March 27, and indefinitely in the U.S., in reaction to the coronavirus pandemic, making in-person purchasing of the new items difficult or impossible for the time being. The new iPad Pro will ship in two sizes, and 11-inch mode starting at $799, and a 12.9-inch model starting at $999, while the new MacBook Air will start at $999 and will begin shipping next week. However, Apple’s biggest bull conceded in a note this morning that the coronavirus and subsequent recession is going to put a dent in the company’s fortunes. Wedbush analyst Dan Ives slashed his price rating on Apple stock from $400 to $335. “This coronavirus tragic pandemic is a once in a century outbreak that has changed the world in a matter of weeks with no timetable on when normalcy will eventually return,” Ives wrote in the note. “As analysts covering Apple, which is such a barometer for global consumer spending and technology trends, looking forward there are clearly going to be some dark days ahead for the company, which is trivial relative to challenges that every human will face over the coming months to flatten the curve and remain healthy.”
Stocks We’re Watching
Athersys Inc (NASDAQ: ATHX): Athersys shares gained as much as 26% yesterday after the biotech announced Q4 results and gave an update on the company’s “highly relevant” COVID-19 treatment. “In January, in the early stages of the COVID-19 outbreak, as part of the U.S. Government’s COVID-19 CoronaWatch program, we were approached by BARDA in its leadership role focused on expediting diagnostics, vaccines, antivirals and therapeutic treatments for these patients,” said Dr. Gil Van Bokkelen, Chairman and CEO of Athersys. “After undergoing multiple reviews, we are pleased to announce that MultiStem® was designated as a “Highly Relevant” therapeutic for COVID-19 by BARDA. We now are working to expedite the further advancement of the program, which has also shown relevance to certain other areas of interest for BARDA.”