Stocks Lose Record Amounts, Treasury Bond Yields Smashed As COVID-19 Begins Taking Its Toll

All of the major US indices posted record losses as coronavirus (COVID-19) continues to rage through 115 countries, with 114,595 confirmed cases and a death toll now over 4,000 (4,028).

Adding to market grief, Saudi Arabia, in an effort to harm other oil producers sent crude futures plunging as it unilaterally slashed prices and raised production output. WTI crude fell below $30 a barrel, recovering slightly to above $34.00 a barrel prior to Tuesday's opening bell. Still, the price cut was mammoth, on the order of a 24.6% decline. WTI closed at $41.28 Friday, finishing at $31.13 on Monday.

The Dow, S&P, NASDAQ, and NYSE all recorded record point losses, blowing away earlier marks. The Dow's 2,013.76 loss nearly doubled the previous record from February 27 of this year (−1,190.95). On The NASDAQ, the 624.94-point loss topped the list, easily surpassing the February 9 drop of −414.30.

Losing 225,81, the S&P vaulted over its previous mark of −137.63, also on February 27 of this year, less than two weeks ago.

The treasury bond complex was not spared, with yields falling across the entire curve by enormous amounts. The 30-year bond finished at 0.99% yield, the first time ever it has been below one percent. The day's decline was an unprecedented 26 basis points. At the other end, one-month bills dropped 22 basis points, from 0.79 to 0.57%.

Offering the lowest yield is the six-month bill, at 0.27%. The 10-year note was absolutely shattered, down 20 basis points, from 0.74 to 0.54%. In terms of curve, the complex is exceedingly flat, with just 72 basis points between the top and bottom yields.

Gold and silver both were higher initially, but were beaten down over the course of the day.

In the United States, the number of new, confirmed cases are rising rapidly as tests from the CDC begin arriving in massive quantities to state and local hospitals and labs. There are now 755 cases of coronavirus in the US, and 26 deaths.

After China, the US ranks 8th overall. Italy has reported 9,172 cases with 463 deaths. Italy's death figures are the highest outside mainland China, as are the number of cases. The Italian government closed its borders completely on Monday after efforts to contain the virus to the northern provinces failed.

The other countries topping the list of most infected are, in order, South Korea, Iran, France, Spain, and Germany, after which comes the United States. All of the aforementioned countries are reporting more than 1,000 cases. Confirmed cases outside China has exceeded those inside China for nearly the past week and are doubling every three to four days.

In addition to the human tragedy, large events are being canceled worldwide. Ireland has canceled all St. Patrick's Day parades, and around the world sporting events, concerts and other large-crowd gatherings are being put on hold or canceled, including the huge South-by-Southwest (SXSW) conference in Austin, Texas. The NCAA basketball tournament, commonly known as March Madness, which begins in a week, NBA basketball, and Major League Baseball, which opens its regular season on March 26, are all mulling the idea of playing games with no fans in the stands.

Businesses are gearing down due to the crisis, with many major firms instructing employees to work from home. School cancelations are on the rise globally, and will be widespread in the US in coming days and weeks.

The after-effects of the virus on the business community and the economy are just beginning to be felt according to many in finance, including hedge fund manager Kyle Bass, who believes the crisi will peak in about a month.

Even though the World Health Organization (WHO) is reluctant to call the worldwide spread of the pathogen a pandemic, it is surely one. The WHO does not want to use the world pandemic as it would trigger the default of "pandemic bonds," designed to provide $500 million to the organization should a pandemic be declared.

With less than an hour before the opening bell in the US, stocks seem to have caught a bid. Japan's NIKKEI was lower for most of the day but finished marginally higher on Tuesday. Other Pacific Rim bourses finished with gains of one to one-and-a-half percent, while European indices are currently sporting gains of around 2.5%.

US stock futures point to a higher open, as traders prepare for another stressful session. The so-called "dead cat bounce" applies, as the markets don't seem to have actually bottomed out. When all is said and done, many countries are going to report GDP losses for the first and likely, second quarters, plunging the world into what may be a prolonged recession.

At the Close, Monday, March 9, 2020:
Dow Jones Industrial Average: 23,851.02, -2,013.76 (-7.79%)
NASDAQ: 7,950.68, -624.94 (-7.29%)
S&P 500: 2,746.56, -225.81 (-7.60%)
NYSE: 11,298.43, -1,053.60 (-8.53%)

Coronavirus, Now Global, Will Dominate News For Months

The idea that stocks would erase losses and finish strongly positive after the World Health Organization (WHO) announced that it was raising the level of threat to that of an international pandemic is just plain perverse.

It's what happens when 70% of the trading is performed by headline scanning algorithms that saw the WHO headline as essentially, "nothing to worry about, we got this."

Nothing could be further from the truth. The coronavirus has spread now to encompass the entire Northern Hemisphere, with Russia the latest to announce cases of the virus within its borders. Italy has issued a six month state of emergency. Two-thirds of China is under some form of travel restriction, quarantine, or other health-related orders. Person-to-person transmission has been reported in at least five countries, including Japan and the United States.

Within two weeks the most recent numbers (9692 confirmed cases, 213 deaths as of January 30) are going to be dwarfed by the magnitude of the spread of this pathogen, and there's still no reliable data on the ratio of confirmed cases to deaths, which range - according to medical experts - from two percent to as high as 12 percent, but nobody actually knows for sure.

The WHO, at its press conference Thursday announcing a global pandemic went out of its way to praise China's efforts to contain the virus. This statement was made only to avoid causing a panic. China was actually slow to report the initial outbreak, initially punishing people who were issuing warnings, eventually acting with little regard to human life, allowing the virus to spread unchecked for weeks.

Wikipedia has about as accurate and compelling a timeline as could be expected.

If the Chinese did such a bang-up job containing this virus, why is it now to be found in more than 25 other countries? Why are flights in and out of China only being banned now, nearly two months after the initial report of this new, deadly strain (December 1 or December 8)?

There's a very good chance, being that China has shut down most transportation facilities in and out of cities and provinces, that food shortages will occur and that more people may die from starvation or other causes than the actual disease.

This virus has been taken far too lightly and is going to continue to spread, virtually unchecked, for months.

Meanwhile, the Senate looks to wrap up the impeachment trial of President Trump on Friday after a vote to allow more witnesses is taken and will likely fail. The Republicans have 50 votes at least with which to defeat the motion, the only wild card being that the presiding judge, Chief Justice of the Supreme Court, John Roberts, could conceivably take the unprecedented step of deciding the motion should the vote come down as a 50-50 tie.

He is expected to NOT take that step, as a tie would defeat the measure.

In economic news, the first estimate of 2019 fourth quarter GDP came in at 2.1%, making all of 2019, at 2.3%, the worst year under President Trump. GDP grew by 2.9% in 2018, and 2.4% in 2017.

And, in Virginia, the state assembly is wasting no time making sure citizens cannot defend themselves.

At the Close, Thursday, January 30, 2020:
Dow Jones Industrial Average: 28,859.44, +124.99 (+0.43%)
NASDAQ: 9,298.93, +23.77 (+0.26%)
S&P 500: 3,283.66, +10.26 (+0.31%)
NYSE: 13,861.92, +18.11 (+0.13%)