Following Monday’s bloodbath on Wall Street, things didn’t get any better on Tuesday. They were merely less bad as stocks tumbled again after the U.S. Centers for Disease Control and Prevention (CDC) told Americans to ready for an outbreak of the coronavirus from China here in the U.S.
- The S&P 500 slipped 3.03%
- The Dow Jones Industrial Average gave up 3.15%
- The Nasdaq Composite slid 2.77%
- American Express (NYSE:AXP), compounding what has become a gloomy stretch of late, plunged 5.69% and was the Dow’s worst-performing name today
Earlier today, the World Health Organization (WHO) stopped short of calling the COVID-19 outbreak a global pandemic, but that may not matter if an outbreak happens in the U.S.
Stocks had previously shown some resilience to virus-related headlines because the situation was viewed as contained in the U.S., but that went out the window yesterday and if a legitimate outbreak occurs here, riskier assets are likely to further decline.
There’s a lot to unpack on the Dow today, so let’s get into that while noting that, in late trading, not a single one of the index’s 30 members were in the green.
Industrial Intrigue
Well, that may be liberal application of the word “intrigue,” but I did point out yesterday that some market observers are bullish on industrial stocks against the coronavirus backdrop. Good thing I cited an external source and didn’t go out on that limb myself because industrial stocks were hammered today.
Using the Industrial Select Sector SPDR (NYSEARCA:XLI) as the barometer, there’s evidence to suggest investors are bailing on the trade-sensitive sector. Investors yanked $848 million from XLI on Monday, according to Bloomberg.
Dow components 3M (NYSE:MMM), Caterpillar (NYSE:CAT), Boeing (NYSE:BA) and United Technologies (NYSE:UTX) are among the largest holdings in XLI. Caterpillar was the best performer in that quartet today, losing “only” 2.33%.
No Effect
With fintech companies becoming increasingly prominent parts of the financial services landscape, it would be reasonable to expect that when a company like JPMorgan Chase (NYSE:JPM) says it’s evaluating acquisitions across its various businesses lines, investors would be enthusiastic.
Underscoring the notion that investors are focusing more on the coronavirus than company-specific issues, JPM stock slumped more than 4% today after CEO Jamie Dimon said the company is mulling acquisition opportunities.
Another plausible reason for weakness in JPM stock today could be speculation that the Federal Reserve could deploy an interest rate cut, perhaps as soon as April, to shore up the economy following the COVID-19 epidemic.
Not an Apple Today
Highlighting just how bad things were for equities today, Apple (NASDAQ:AAPL) dropped more than 3% and 17 Dow stocks sported larger losses. There has been talk that Apple stock has been due for a correction and there appear to be legitimate reasons why a pullback is afoot.
Data from the Chinese government indicate smartphone sales there tumbled 37% last month and this figures could be even worse.
“Given the total shutdown of retail stores, corporate offices and manufacturing plants in the first half of the month of February and a gradual and uncertain pace of normalcy, February shipments would likely be materially worse,” according to UBS analysts.
Visa Vexed
For investors that have been waiting for declines in Visa (NYSE:V) to get on board with the credit card giant, the coronavirus has brought that opportunity. Problem is identifying when the stock is going to stop faltering because it’s in the midst of a nasty tailspin.
Today brought Visa’s worst one-day percentage decline in four years and the stock’s worst close since the last day of 2019. Visa’s current four-day skid is its worst in almost a decade.
Bottom Line on the Dow Jones Today
The stark reality is that even if the COVID-19 situation is contained soon and an outbreak is avoided in the U.S., global growth will slow in the current quarter.
“Potential disruptions to global value chains could drive up prices — and push companies that suffer from such disruptions to build up higher stockpiles and start to rethink prevalent just-in-time inventory management systems,” said BlackRock in a recent note.
Sure, stocks could rebound in the second half of 2020, but that thesis faces the headwind of what will likely be a close, contentious U.S. presidential election.
As of this writing, Todd Shriber did not own any of the aforementioned securities. He has been an InvestorPlace contributor since 2014.
