This post was originally published on this site
U.S. stock market futures rallied from steep initial losses late Sunday, suggesting a pause to the selloff when trading begins Monday, following the worst week on Wall Street since 2008.
Dow Jones Industrial Average futures YM00, +0.26% initially fell more than 300 points, but stabilized and were last up more than 100 points. S&P 500 futures ES00, +0.06% and Nasdaq Compoosite futures NQ00, +0.10% initially fell more than 1.5%, but were last in positive territory.
Stocks fell for a seventh straight day Friday. The Dow Jones Industrial Average DJIA, -1.39% shed 357.28 points, or 1.4%, to settle at 25,409.36, while the S&P 500 SPX, -0.82% dropped 24.54 points, or 0.8%, to end at 2,954.22. The Nasdaq Composite Index COMP, +0.01% gained less than a point to finish at 8,567.37.
All three indexes fell into correction territory, widely defined as a drop of at least 10%, but no more than 20%, from a recent peak, as fears of the spreading coronavirus outbreak rattled investors. The virus is starting to affect global trade and travel and lowering expectations about earnings and economic growth.
The World Health Organization’s director general, Dr. Tedros Adhanom Ghebreyesus, urged Sunday that global financial markets be calm. “We need to continue to be rational. Irrationality doesn’t help. We need to deal with the facts,” he said at an event in Riyadh, Saudi Arabia.
That may be easier said than done. “Any sense of rational thinking appears to have gone missing,” Stephen Innes, chief market strategist at AxiCorp, wrote in a note Sunday. “Near term, the markets will be driven by how far the fear of the coronavirus spreads, probably not how the data plays out. But since global growth has rested on consumer spending over the last year. If consumers are afraid (whether rational or not), the markets will collapse.”
In the U.S. on Sunday, Vice President Mike Pence and Health and Human Services Secretary Alex Azar urged calm as they sought to reassure the American public as more cases were reported across the country. Pence and Azar said thousands of COVID-19 test kits were being distributed to state and local officials, with more to come.
On Saturday, the nation’s first coronavirus death was reported in Washington state.
The global economic impacts of the outbreak are already being seen. On Saturday, official data showed China’s factory and nonfactory activity sank to record lows in February as China’s economy struggled to resume normal production following shutdowns due to the outbreak.
That raised fears of a global ripple effect.
“With the virus disrupting global supply chains and reducing growth forecasts across the board, a return to stagflation is a possibility,” said Nancy Davis, founder and chief investment officer of Quadratic Capital, in comments Sunday. “Stagflation is disastrous news for investors with rising consumer prices and sluggish economic growth. The supply chain disruptions from the coronavirus could cause both. Investors should not dismiss stagflation as some antiquated relic of the 1970’s.”
