Coronavirus Concerns Crush Equities

Equities around the world fell sharply today as more cases of the deadly coronavirus were announced in Italy, South Korea and Iran. Treasuries and gold were much higher in the flight-to-safety. The U.S. dollar gained ground versus most of its major peers, but gains in the U.S. Dollar Index were contained by losses versus the greenback’s fellow safe-haven, the Japanese yen. Oil fell sharply with equities. While completely overshadowed by the virus concerns, economic data did show a return to expansion for regional manufacturing in the Dallas Fed area. Intuit announced a deal to acquire Credit Karma for roughly $7.1 billion and Wells Fargo reached a $3.0 billion settlement with the DOJ and SEC regarding investigations into its bank sales practices and related disclosures.

The Dow Jones Industrial Average tumbled 1,032 points (3.6%) to 27,961, the S&P 500 fell 107 points (3.2%) to 3,231 and the NASDAQ dropped 355 points (3.7%) to 9,221. 1.2 billion shares were traded on the NYSE and 3.1 billion shares changed hands on the NASDAQ. WTI oil shed $1.95 to $51.43 per barrel and wholesale gasoline was down $0.04 to $1.61 per gallon. Elsewhere, the Bloomberg gold spot price added $27.80 to $1,676.60 per ounce. The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was slightly higher at 99.30.

The February Dallas Fed Manufacturing Index moved back into expansion territory (a reading above zero), rising to 1.2 from -0.2 in January, above the Bloomberg expectation of 0.0. Production jumped, along with unfilled orders, but expansion in new orders decelerated and employment contracted slightly.

The selloff was the worst in Europe. The U.K. FTSE 100 Index dropped 3.3%, France’s CAC-40 Index fell 3.9%, Spain’s IBEX 35 Index tumbled 4.1%, Germany’s DAX Index decreased 4.0%, Switzerland’s Swiss Market Index declined 3.6%, and Italy’s FTSE MIB Index plunged 5.4%. Stocks in Asia were also lower, led by a 3.9% drop for South Korea’s Kospi Index. Markets in Japan were closed for a holiday. China’s Shanghai Composite Index declined 0.3% and the Hong Kong Hang Seng Index traded 1.8% lower. Australia’s S&P/ASX 200 Index fell 2.3% and India’s S&P BSE Sensex 30 Index declined 2.0%.

Treasuries gained solid ground, with the yield on the 2-year note falling 11 basis points (bps) to 1.25%, the yield on the 10-year note down 11 bps to 1.36% and the 30-year bond rate dropping 9 bps to 1.83%.

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