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U.S. stocks finished lower Friday, but after a volatile session that saw the Dow recover about half of the day’s losses and even notch a gain for the week as investors watched cases of COVID-19 climb above 100,000 globally while and oil prices tumbled by the most in five years.
The potential for the spread of the coronavirus world-wide to disrupt economic activity has placed pressure on safe-haven asset prices, notably driving the U.S. Treasury 10-year bond yield to a new record low below 0.8% and gold prices saw the biggest weekly gain since 2016.
See:Why stocks tanked despite the Fed’s emergency rate cut
How did major benchmarks fare?
The Dow Jones Industrial Average DJIA, -0.98% settled 256.50 points lower, or 1%, to 25,864.78, while the S&P 500 SPX, -1.70% lost 51.57 points, or 1.7%, to close at 2,972.37. The Nasdaq Composite COMP, -1.86% finished 162.98 points lower, or 1.9%, at 8,575.62.
On Thursday, the Dow closed at 26,121.28, down 969.58 points, or 3.6%, while the S&P 500 lost 106.18 points, 3.4%, to close at 3,023.94. The Nasdaq fell 279.49 points, 3.1%, to close at 8,738.60.
For the week, the Dow turned positive to gain 1.8%, the S&P 500 added 0.6% and the Nasdaq rose 0.1%, following a sharp rally in late afternoon trade.
What drove the market?
Stocks ended a volatile week with further losses as the spread of the viral outbreak that was first identified in Wuhan, China cast a shadow over economic activity, accelerating purchases of assets perceived as safe havens and placing additional pressure on those considered risky like stocks.
Adding to market woes, oil futures plunged 10% on Friday after talks between the Organization of the Petroleum Exporting Countries and their allies collapsed, with Russia refusing to agree to a Saudi-led plan for additional crude production cuts.
Read: OPEC+ oil-deal failure may lead to $30 oil
“There is an element to this that’s like dynamite fishing,” said Hans Olsen, chief investment officer at Fiduciary Trust Company, about the shocks to stocks and other financial assets from U.S. spread of the coronavirus. “The boom happened last week. Now we have to wait for the casualties to emerge,” he said of potential distress for investment funds due to the volatility in financial assets.
The ongoing equities selloff overshadowed a better-than-expected jobs numbers from the Labor Department, which reported that the U.S. created 273,000 new jobs in February. However, the data was compiled before the coronavirus contagion spread world-wide. Economists polled by MarketWatch had forecast a 165,000 increase.
“The US [jobs] number was decent but it failed to tame the turmoil in the equity markets and investors are not even remotely interested in riskier assets,” wrote Naeem Aslam, chief market analyst at AvaTrade in a note after the nonfarm payrolls report.
The unemployment rate fell a notch to 3.5% and matched a 50-year low, with average wages paid rising 9 cents, or 0.3%, to $28.52 an hour.
Optimistic market participants, however, say, one positive takeaway from the jobs report is that it reflects that the domestic economy stands on a solid footing as it braces for the impact the infectious disease might bring. “Given the strength of the data though, the economy appears to have enough positive momentum to slow for a time without significant risk of tipping into recession,” wrote Jim Baird, chief investment officer for Plante Moran Financial Advisor, in a Friday research report.
However, “the COVID-19 infection rate is multiplying and more states in the U.S. are imposing emergency orders,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Friday note.
The disease has sickened more than 100,000 people so far and the death toll has risen above 3,300, while disrupting international trade and travel, compelling central banks to reduce their benchmark interest rates. On Tuesday, the Federal Reserve cut its federal-funds target rate by a half a percentage point to a 1%-1.25% range, in the first emergency rate cut by the U.S. central bank since the 2008 financial crisis.
See:Coronavirus update: 101,733 cases, 3,460 deaths
Late Thursday, Dallas Fed President Rob Kaplan said the epidemic’s impact might last for three to five months but expressed optimism about the U.S. chances of avoiding a recession due to the illness.
“I still believe we can get through this year without a recession,” Kaplan said, in an interview on Bloomberg Television. Kaplan is a voting member on the rate-setting Federal Open Market Committee’s which will meet on March 17-18.
However, some are doubtful that policy makers have the firepower to curb the potential economic harm from a deadly pathogen that is spreading rapidly.
“We disagree with central bank pronouncements that there is room to fight the crisis.” wrote George Saravelos, Deutsche Bank’s head of global head of currency research, in a recent research note.
Which stocks were in focus?
- TSLA, -2.90% Tesla Inc.s stock lost 2.9% Friday, extending Thursday’s decline.
- AAPL, -1.32% Apple Inc.’s stock price target was cut to $295 from $395 at Deutsche Bank. Shares fell 1.3%.
- BGG, -4.69% Briggs & Stratton Corp. shares lost 4.7% after the company announced a charge in strategy.
- ON, -3.08% Apple supplier ON Semiconductor Corp. issued a revenue warning for the first quarter on Friday, due to the change in business conditions being created by the coronavirus COVID-19. ON shares were 3.1% lower.
- SKX, -0.86% Skechers USA Inc. shares slipped 0.9%, after the sporting shoe retailer said the fallout from the coronavirus has gotten worse since it last updated investors when it reported earnings last month.
- COST, -1.40% BJ, +4.00% KR, -4.27% Shares of Costco Wholesale Corp. , BJ’s Wholesale Club Holdings Inc. and Kroger Co. ended mixed, despite a surge in demand for hand sanitizer, cleaning and disinfecting materials, canned and dry grocery items and other products associated with the fight against the spread of COVID-19.
- JPM, -5.16% MSFT, -2.82% Leading the Dow’s slump were shares of JP Morgan Chase & Co., which shed 5.2% as CEO Jamie Dimon was recovering from an emergency heart-related surgery, and Microsoft Corp. , which ended 2.8% lower.
- United Airlines UAL, +0.98% DAL, +1.95% Airline stocks recovered some ground after Trump’s chief economic advisor Larry Kudlow said the White House is considering “targeted measures” to offset the negative impact on the industry from the coronavirus outbreak. jumped 2%, while Delta Air Lines rose 1%.
How did other assets perform?
The benchmark U.S. 10-year Treasury note TMUBMUSD10Y, 0.767% dipped to a record low of 0.71%, while booking its largest weekly drop since Dec. 2008.
Gold for April delivery GCJ20, +0.37% finished a choppy session 0.3% higher at $1,672.40 an ounce, but had been approaching the psychologically important, round-number price of $1,700, before paring gains after the jobs report.
April crude futures CLJ20, -9.43% closed 10.1% lower to settle at $41.28 a barrel on the New York Mercantile Exchange, after Russia resisted a call by its OPEC allies to made additional cuts to crude output.
The Cboe Volatility Index VIX, +5.85% rose 19.5% to 47.36 on Friday. The VIX is a gauge of implied volatility in the stock market. Its historic average is around 19.
The U.S. dollar DXY, -0.75% was down 0.8%, as gauged by a gauge of a half-dozen currency trading partners. The index is down 2.4% so far this week,
In Europe, stocks finished broadly lower. The FTSE 100 FTSE, -1.93% was 3.6% lower, and the Stoxx Europe 600 index SXXP, -3.66% closed 3.7% lower.
In Asia overnight, the Shanghai Composite Index SHCOMP, -1.21% fell 1.2% and Tokyo’s Nikkei 225 NIK, -2.71% skidded down 2.2%. The Kospi 180721, -2.16% in Seoul lost 2.2%. China’s CSI 300 Index 000300, -1.62% retreated 1.6%.
