Markets “In a Nutshell” for March 3, 2020
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 12.36%, the S&P 500 fell 11.49%, the New York Stock Exchange Composite (2,000 stocks) fell 11.41% and the average investors index (Value Line Index) was down 12.51%. Foreign stocks (DJ Global ex U.S.) were down 8.71%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 38 basis points lower at 1.09%. (Data source: Wall Street Journal)
Stocks Plunge Into Correction Territory
The U.S. stock market took a nose dive last week, plunging more than 10% as the coronavirus’ spread into more developed countries exacerbated by the fears that the disease has not come close to being fully contained. While economic and supply chain damage seemed to be well forecasted, especially in China, it seemed like last week was the first time the stock market seemed to fully comprehend the likely impact. The price of oil tumbled as well, taking an already fraught energy sector down with them to more than -25% on the year. Success of further containment strategies is the best hope in the short term for the global economy, with any vaccine too far away from government approval to be of any help soon. (Barron’s)
Possible Federal Reserve Response
With such a massive drop in the stock market, many paid attention to Federal Reserve President Jerome Powell’s press conference on Friday to see if he would signal any potential moves by the Federal Reserve to ease conditions for financial markets. While cutting rates would do nothing to cure the virus, Powell made it clear that the Fed would be prepared to cut rates if the U.S. economy looked like it would slow enough to warrant it. Cutting rates, or even just the expectation of doing so, could lift stocks from one of the worst weeks in recent memory, but would continue to weaken the Federal Reserve’s ability to combat the next recession. Many of the controversial tools used by the Federal Reserve, like quantitative easing, are becoming the only options the Fed will have. The Federal Reserve members will meet later this month to decide what their response will be and will likely shape how financial markets will respond to the inevitable slowdown from the coronavirus. (Wall Street Journal)
The S&P 500 fell 11.49% last week. When was the last time the index fell that much in one week?
Answer is below.
Have a Great Week!
Answer to quiz:
2. The last time the S&P 500 fell that much in a week was in October 2008, in the midst of the financial crisis. (Wall Street Journal).