Large-cap stocks are falling hard on Monday as fears surrounding the Wuhan coronavirus continue to grow exponentially alongside the infection count. A growing list of Chinese cities are effectively quarantined as officials scramble to limit the spread of the easily transmitted disease. The fear is that global travel bans are sure to follow, further weighing on global economic activity.
Moreover, thinking though this as a hypothetical, a global pandemic would leave central bankers — the deus ex machina of this longest-ever bull market in history — powerless to do anything. If only the Federal Reserve could print vaccines, you know?
That risks spooking stocks in a way that investors haven’t felt in years. And as a result, many well-known and widely-held stocks are beginning to roll over. Here are four to sell now:
Bank of America (BAC)
Bank of America (NYSE:BAC) shares are falling hard. They’re falling further away from their 50-day moving average to close in on their 200-day moving average for a drop that would be worth a loss of roughly 10% from here. This risks returning shares to the middle of a consolidation range going back to early 2018. When the company last reported results, management warned of net interest margins falling this year as the recent pullback in interest rates weighs on profitability.
Analysts at Atlantic Equities recently downgraded the stock to “neutral” from “overweight.” My colleague Vince Martin digs in deeper into the story in a new article that’s worth a look.
Apple (NASDAQ:AAPL) shares are testing critical support at their 20-day moving average, risking a test of the 50-day average that hasn’t been touched since early September. The stock has been at the center of the tech-fueled rally that has pushed the major equity averages to new record highs over the past month — leaving prices vulnerable to a virus-fueled profit-taking pullback.
The company also has significant exposure to the Chinese economy, both through its supply chain network as well as end-user demand from China’s citizens. Greater China accounted for nearly 17% of net sales in fiscal 2019. We’ll know more about the risks to the bottom line from the coronavirus when Apple reports results on Tuesday after the close.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) shares are cratering badly, as the energy market overall has been the most sensitive area responding to coronavirus fears, since economic demand will have a direct impact on energy usage. Travel bans mean less gasoline and jet fuel, for instance.
Shares continue to melt away from six-month consolidation near $70, returning to the lows tested in late 2018 and late 2016. Shares were recently downgraded from “neutral” to “sell” by analysts at Scotiabank.
Concerns of a manufacturing slowdown have been fueled this week on reports that global automakers including Nissan and French groups PSA and Renault were pulling foreign staff from China while Suzhou, the home of manufacturers including iPhone contractor Foxconn, was postponing the return of migrant workers.
Disney’s (NYSE:DIS) share price decline is accelerating, dropping below its 200-day moving average to return to levels not seen since September, as investors worry that a pandemic would directly impact its theme park attendance. Remember, Shanghai Disney Resort is still closed with no reopening date.
The company has been putting a lot of focus on its parks recently, with the opening of the new Rise of the Resistance ride in Disneyland and Disney World to help build excitement around its Star Wars franchise for a new generation. This was an area that enjoyed an economic moat as the company wades into the brutally competitive online streaming arena with the launch of Disney+.
As of this writing, William Roth did not hold a position in any of the aforementioned securities.