Friday February 28th

28-02-2020

Dow set to lose nearly 400 points at the open as worst week since the financial crisis continues

U.S. stock index futures pointed to more losses early Friday after the major indexes suffered a tumble that sent them more than 10% below their record highs. Futures pared their initial decline after Kevin Warsh, a former Federal Reserve governor, told CNBC on Friday he expects global central banks to act soon in response to the coronavirus outbreak. The Fed has “a knife. There’s a gunfight,” he said on “Squawk Box.” “You might as well go find some friends that also have knives and see if you can’t to it together.” As of 7:35 a.m. ET, Dow Jones Industrial Average futures were down about 200 points and indicated an opening loss of nearly 400 points. S&P 500 and Nasdaq 100 futures also pointed to a lower open on Friday. Futures were under pressure in part because investors kept adding to their bond-market exposure. The benchmark U.S. 10-year Treasury yield touched a fresh record low. It was last at 1.18%. Yields move inversely to prices. Caterpillar — a bellwether stock for global growth — was the worst performer among Dow stocks in the premarket, sliding more than 3%. Apple shares slid 2.9% while Chevron and Cisco Systems dipped more than 2% each. New Zealand and Nigeria reported overnight their first coronavirus cases. South Korea, meanwhile, confirmed more than 500 new cases. China reported 327 additional cases. The Dow plummeted nearly 1,200 points on Thursday — its biggest one-day point drop ever — as worries over the coronavirus possibly spreading sent stocks spiraling lower. The 30-stock average closed in correction territory along with the S&P 500 and Nasdaq Composite. The Dow had closed at a record high on Feb. 12. It only took the S&P 500 six days to fall from an all-time high into correction levels, marking the broad index’s fastest drop of that magnitude outside of a one-day crash. “People have been so preconditioned to buy the dip and to always expect the market to recover that people can get smacked around with moves like this,” said Patrick Hennessy, head trader at IPS Strategic Capital. “No one knows how this thing ends.” Thursday’s declines also put the Dow and S&P 500 down more than 10.5% each for the week, on pace for their worst weekly performance since 2008. Norwegian Cruise Line and American Airlines are among the worst-performing S&P 500 stocks this week, dropping more than 20% in that time. Las Vegas Sands has lost more than 10% week to date. “The timing of this was just the worst with respect to investor sentiment being elevated,” said Doug Ramsey, chief investment officer at The Leuthold Group, referring to the coronavirus outbreak. “I’m not sure that the market has really priced in the potential economic impact of this.” Concerns over the coronavirus have also led several companies to issue earnings and revenue warnings. Microsoft said Wednesday one of its key divisions may not meet the company’s previous revenue guidance. PayPal also warned about its outlook on Thursday. Goldman Sachs’ David Kostin warned U.S. companies will see no earnings growth this year. “Our reduced profit forecasts reflect the severe decline in Chinese economic activity in 1Q, lower end-demand for US exporters, disruption to the supply chain for many US firms, a slowdown in US economic activity, and elevated business uncertainty,” said Kostin, the bank’s chief U.S. equity strategist. Stocks in Asia declined on Friday as fears over the spread of the coronavirus globally drove investors to safety. China’s Shenzhen stocks led losses among major markets regionally as they closed sharply lower. The Shenzhen component was 4.8% lower at 10,980.77 while the Shenzhen composite dropped 4.928% to approximately 1,801.75. The Shanghai composite was down 3.71% to end its trading day at 2,880.30. Hong Kong’s Hang Seng index dropped 2.42% to close at 26,129.93. Japanese stocks also saw major declines. The Nikkei 225 dropped 3.67% to close at 21,142.96 while the Topix index fell 3.65% to end its trading day at 1,510.87. South Korea’s Kospi was down 3.3% to end its trading day at 1,987.01. Oil prices slumped to their lowest in more than a year on Friday and were set for their steepest weekly fall in more than four years as the spread of the coronavirus stokes fears of slowing global demand. Investors are increasingly worried as the virus has spread beyond its epicenter in China to more than 40 other countries. The most active Brent crude contract for May was down 2.2%, at $51.03 a barrel, a 14-month low. The front-month April contract expires later on Friday. West Texas Intermediate (WTI) crude futures fell 2.9%, to $45.70 per barrel. U.S. crude has fallen about 14% for the week, the biggest weekly decline since May 2011.