Fastest correction ever—the S&P 500 sell-off is one for the record books
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Happy Friday, everyone.
It’s bleak. That’s the only way to describe the global markets this morning. The sell-off continues across all major indices in Asia and Europe after yesterday’s brutal day. I’m looking at nothing but red screens.
Here’s the latest factors moving the markets.
Minutes before the European opening bell, the headline flashed of a new town under quarantine. It’s in Germany, on the Dutch border. Germany’s DAX is down more 5%, as I type, its worst day since 2016. The other major European bourses weren’t faring much better. The U.S. futures are down, but not nearly as sharply.
Elsewhere, the dollar is down, crude is down, and commodities are slumping again. Even gold is selling off.
The bulls clearly are in retreat. Yesterday’s plunge put the European and American markets in correction territory, down more than 10% from their highs, which weren’t all that long ago. In fact, the S&P has experienced its fastest correction ever. Overall, the markets are on track for their worst week since 2008, the height of the financial crisis.
Every sector, it seems, is taking a beating: travel and leisure, financials, automotive, tech. Goldman Sachs analysts yesterday published an investor note saying coronavirus has caused them to update their models. They now project zero earnings growth for U.S. companies. Citi followed up this morning extending the zero handle to global companies.
Once the markets descended into correction—the C-word—land yesterday, the focus then shifted to the R-word—recession. As in when? As soon as mid-2020, says legendary analyst Komal Sri-Kumar. And now we can cue up bets on when the Fed will slash interest rates. Predictions of a cut went from a longshot earlier this month to inevitable—as soon as next month.
As we do every Friday, here’s a look at the big themes.
By the numbers
Six. As in six days. The Dow and S&P 500 have fallen six straight sessions. As we said above, it’s been the fastest top-to-correction drop ever for the S&P. Since its close on Friday, Feb. 21, the benchmark lost 353 points. And it’s declined 12% since Feb. 19. The Dow, meanwhile, is off 11.13% this week, its 14th worst week in its history.
26. As in Aug. 26, 2019. Where were you on that day? Can’t remember? Never mind. On that day, the Dow was starting a little rally. It climbed above 25,766 mid-day and went on a three-weak tear. Yesterday, the Dow closed at 25,766.64. We’re back to August, 2019 levels.
72. As in 72%. Investors are now calculating those are the odds for a Fed interest rate cut at the upcoming March meeting. The odds were a mere 9% a week ago. And the central bank may not be done there. Investors are banking on a significant cut—of at least 50 basis points—in July. Pinned down on that very question, ECB President Christine Lagarde says it’s too early for Europe to act.
To end on a positive note—it’s Friday. The markets get a bit of a breather. And so do I. I’m going on break. All next week Bull Sheet will be in the capable hands of my colleague Rey Mashayekhi. He’s based in the States, so you’re probably going to see Bull Sheet hit your in-boxes at a different time.
Take care, everyone.
Back to earth. Shares in Virgin Galactic plummeted 24% Thursday after analysts at Credit Suisse and Morgan Stanley—two of only three firms covering the space tourism company—downgraded it. The stock had already slumped 16% on Wednesday after the company reported a 2019 loss of $211 million on revenues of $3.8 million. In Fortune, Erik Sherman tackles the thorny question of how to value the pioneering company.
Karate shop. Actor Steven Seagal, star of “Above the Law” and “Under Siege”, is the latest celebrity punished by the U.S. Securities and Exchange Commission for failing to disclose he was being paid to promote a digital token, Bloomberg reports. Seagal was promised $1 million in cash and tokens for touting an initial coin offering from the oddly spelled startup Bitcoiin2Gen. He agreed to settle the allegations without admitting wrongdoing, and will pay back $157,000 he received in promotional payments, plus a $157,000 fine, the SEC said.
OPEC cut? Plunging demand for oil has prompted Saudi Arabia to push for deeper oil production cuts when OPEC and its allies meet in Vienna next week, the Financial Times reports. The kingdom is asking producers, including Russia, to sign up to a production cut of an additional 1 million barrels a day, at the March 5-6 meetings, a significantly deeper cut than previously discussed.
Quiz time. We know that President Trump is a frequent market commentator, particularly on good days. When did he deliver the following tweet: “Highest Stock Market in History, By Far!”?
- A. Nov. 6, 2018, the day of mid-term elections
- B. Sept. 24, 2019, the day the House announced formal impeachment inquiry.
- C. February 19, 2020, a whopping nine days ago.
Answer: C., February 19, 2020. Since then the Dow Jones Industrial Average suffered one of its worst weeks in history, dropping 11% to take it into correction territory.
A reminder: careful what you tweet.