Markets Remain Highly Unsettled……

U.S. equities were again sharply lower, triggering a second 15-minute trading halt this week, as the uncertainty surrounding the COVID-19 outbreak continues to intensify, exacerbated yesterday by the World Health Organization (WHO) declaring the outbreak a pandemic and President Donald Trump announcing travel restrictions from Europe. The lack of clarity regarding a U.S. fiscal response appeared to amplify the market uneasiness, along with the ongoing tumble in the oil markets. The downdraft came despite a midday bump that followed an announcement from the Federal Reserve of new funding actions aimed at easing the strained capital markets. Elsewhere, Carnival Corporation announced a voluntary and temporary pause of its global ship operations for 60 days. Meanwhile, the European Central Bank seemed to have surprised the markets by holding off on announcing a rate cut and opting to instead deploy further stimulus measures through additional long-term lending operations. Treasury yields were mixed, bounding off their lows after the Fed announcement, while gold came under heavy pressure, and the U.S. dollar gained ground. In economic news, jobless claims unexpectedly dipped and wholesale price inflation came in cooler than expected. Asia and Europe also finished with widespread losses.

The Dow Jones Industrial Average plunged 2,353 points (10.0%) to 21,201, the S&P 500 Index fell 261 points (9.5%) to 2,481 and the Nasdaq Composite tumbled 750 points (9.4%) to 7,202. In heavy volume, 2.1 billion shares were traded on the NYSE and 5.0 billion shares changed hands on the NASDAQ. WTI crude oil lost $1.48 to $31.50 per barrel and wholesale gasoline was down $0.21 to $0.90 per gallon. Elsewhere, the Bloomberg gold spot price sank $65.40 to $1,569.64 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.9% to 97.38.

The stock markets continued to plunge, as risk-off sentiment has intensified and conviction continues to remain elusive amid accelerating uncertainty regarding the magnitude and duration of the COVID-19 (coronavirus) outbreak, after the World Health Organization (WHO) declaring it a pandemic. A plethora of upcoming events have been canceled or altered, with a number of major sporting organizations suspending seasons, following in the footsteps of the National Basketball Association’s (NBA) announcement to postpone its season after a player tested positive for the coronavirus.

President Donald Trump also announced a restriction of travel from Europe and the lack of a clarity regarding a potential fiscal response from the government appears to be exacerbating the volatility. The coinciding turbulence in the oil markets amid an all-out price war between Saudi Arabia and Russia that has pummeled oil prices and the energy sector has added another layer of market disruption. The downside moves for the equity markets in morning action triggered a 15-minute halt in trading for the second time this week. As a result of the turmoil in the capital markets, the New York Federal Reserve announced new funding actions aimed at easing some of the strain, pledging to pump over $1.5 trillion into the financial system. One part of the announcement will have the Fed widen the scale for its $60 billion in purchases, while also offering $500 million in a 3-month repurchase operation (repo) today, and further contributing $500 million in an additional 3-month repo and $500 million in a 1-month repo operation tomorrow.

©2020 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.