No April Fools…Virus Escalation Rattles Markets…..

U.S. stocks finished solidly lower, as uncertainty has swelled surrounding the economic and social impact of the coronavirus pandemic, with yesterday’s warning from President Trump of a “painful” two weeks ahead exacerbating sentiment. The U.S. is expected to enter a rough patch en route to the eye of the storm, while tolls in Europe continue to ramp up. U.S. manufacturing output contracted, but at a smaller-than-expected pace to cap off a slew of reads from across the globe, which also showed that China surprisingly returned to expansion, but activity contracted in Europe and the U.K. In other economic news, ADP’s private sector jobs report fell by a smaller amount than forecasted, construction spending unexpectedly dropped and mortgage applications rose as interest rates tumbled. Treasury yields were mostly lower, and crude oil prices came under renewed pressure, while the U.S. dollar and gold were higher. On the equity front, Xerox ditched its takeover attempt of HP, W.W. Grainger elected to draw down $1.0 billion from its unsecured revolving credit facility, and first quarter auto sales showed larger-than-expected drops. Europe finished with widespread losses, while Asia was mostly lower with Australian markets bucking the trend.

The Dow Jones Industrial Average tumbled 974 points (4.4%) to 20,944, the S&P 500 Index plunged 114 points (4.4%) to 2,471 and the Nasdaq Composite fell 340 points (4.4%) to 7,361. In moderately heavy volume 1.3 billion shares were traded on the NYSE and 3.7 billion shares changed hands on the NASDAQ. WTI crude oil fell $0.17 to $20.31 per barrel and wholesale gasoline was down $0.04 at $0.55 per gallon. Elsewhere, the Bloomberg gold spot price increased $13.14 to $1,590.32 per ounce, while the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 99.47.

U.S. stocks began the second quarter under pressure after registering the worst first quarter on record and posting a quarterly drop only rivaled by periods in the Depression era in the 1930s and the Global Financial Crisis of 2008. The markets continued to be hampered by uncertainty regarding the depth and duration of the economic and social shocks associated with the unprecedented COVID-19 (coronavirus) pandemic, which has fostered a self-imposed shutdown of the global economy and embrace of social distancing in an attempt to mitigate the spread of the coronavirus. Stocks had seen a noticeable rebound over the past week as U.S. lawmakers have deployed a massive amount of fiscal stimulus measures, reciprocated by a drastic monetary policy response from the Federal Reserve, while developments out of the healthcare sector have delivered hopes of potential expedited detection and treatment of the virus. However, the U.S. is now the epicenter of the pandemic and has yet to reach the apex of the outbreak as new cases and death tolls continue to rise and President Donald Trump has warned that the next couple weeks will be painful, and the markets continue to grapple with whether the recent rebound is a counter trend move, looking to see if the markets will breach the March 23rd low.

More timely employment data will grace tomorrow’s economic calendar, courtesy of weekly initial jobless claims, forecasted to rise to a level of 3.5 million following last week’s 3.3 million surge, while other reports of note include factory orders for February, expected to inch 0.2% higher m/m, as well as the trade balance, with economists projecting the deficit narrowed in February to $40.0 billion from the $45.3 billion registered in January.

©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.