Rising concerns about coronavirus outbreak dragged major benchmarks in the negative territory on Friday. However, stocks pared losses after the Federal Reserve Chairman Jerome Powell said that central bank is “closely monitoring developments” about coronavirus’ impact on economy. This helped the Nasdaq Composite to end in the green.
The Dow Jones Industrial Average (DJI) fell 357.24 points or 1.4%, to close at 25,409.36 and the S&P 500 fell 24.54 points or 0.8% to close at of 2,954.22. Meanwhile, the Nasdaq Composite Index closed at 8,567.37, gaining 0.89 points. The fear-gauge CBOE Volatility Index (VIX) decreases 8.2% to close at 36.84. Declining issues outnumbered advancing one for a 5.56-to-1 ratio on the NYSE and a 2.95-to-1 ratio on the Nasdaq favored decliners.
How Did the Benchmarks Perform?
All the 11 sectors of the S&P 500 were in the red with the utilities, consumer staples and real estate and financial sectors falling more than 3% on Friday. Airlines have been hit the most by this coronavirus pandemic. Shares of American Airlines Group, Inc. (AAL - Free Report) a Zacks Rank #3 (Hold) company, dropped 7.5% on Friday. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Overall, the S&P index recorded no new 52-week highs and 128 new lows. On the other hand, Nasdaq recorded 16 new highs and 509 new lows.
Coronavirus Widespread Raised Fears of a Global Recession
There have been 89,219 confirmed cases of Covid-19 recorded globally, so far and fatalities have risen to 3,058. In fact, South Korea, Japan and Italy are closing factories as confirmed coronavirus cases are climbing fast. The virus scare has hit the tourism industry across all the foresaid countries.
Friday, New Zealand and Nigeria were among the latest countries to report their confirmed Covid-19 cases. While, the US administration is expanding existing travel restrictions on Iran, Italy and South Korea. Further, public health officials have warned about chances of infection clusters appearing, which may lead to quarantines and production slowdowns.
Fed to Take Appropriate Measures to Support Economy
Stocks pared losses on Friday slightly after the Federal Reserve Chairman Jerome Powell said that the fundamentals of the U.S. economy remained strong but the central bank will “closely monitoring developments” in Coronavirus and is analysis its impact on the economic outlook.
Additionally, Powell also said that the Fed “will use (our) tools and act as appropriate to support the economy,” hinting at an interest rate cut. Investors eager wait for Fed’s at least 50-basis point cut in the next regular monetary-policy meeting, scheduled for March 18.
On Friday, the government reported that consumer spending increased a mild 0.2% in January, below the consensus estimate of 0.3%. However, personal income rose 0.6%, beating the consensus estimate of 0.3%, the biggest gain in 11 months. This increase in personal income however includes annual cost-of-living increases in Social Security benefits as well as tax credits tied to the Affordable Care Act.
Additionally, according to the Commerce Department’s advanced estimate released on Friday, the U.S.’s trade deficit in goods narrowed 4.6% in January.
On the other hand, University of Michigan’s consumer confidence index rose to 101 beating the consensus estimate of 100.4.
Dampened by the Covid-19 scare, stocks remained in the negative territory this week. The Dow fell 12.4%, the S&P 500 lost 11.5% and the Nasdaq shed 10.5%. In fact, the more than 10% drop indicates a correction and the S&P’s fastest in its history.
Investors are keenly looking for data showing coronavirus’ economic impact and selling off equities and moving to buy treasury bonds, pushing the 10-year yields to its fourth record low so far this week.
For the month of February, the Dow lost 10%, the S&P 500 shed 8.4% while the Nasdaq slipped 6.4%. Coronavirus scare forced investors to opt for defensive stocks and safe haven assets like gold.
Supply chain cross the glob has crippled the economy, due to containment measures. And impacted business investment as companies remain unsure as to when the factories could get back to production at full potential. Several companies have downgraded their outlook for growth and corporate earnings.
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