Volatility continues to wreak havoc on equities, and that was the case again on Thursday. Selling pressure overwhelmed investors again in the stock market today, as the S&P 500 fell 9.5%.
That’s alongside the 9.99% and 9.4% fall in the Dow Jones Industrial Average and Nasdaq Composite. Small-capitalization stocks are getting crushed too, with the iShares Russell 2000 ETF (NYSEARCA:IWM) down a painful 11.3%.
There is nowhere to hide at the moment.
Bitcoin prices fell more than 25% at one point, breaking below $5,700 and hitting their lowest point since April. The iShares 20+ Treasury Bond ETF (NASDAQ:TLT) could hardly hold its gains, turning lower in the session before snapping back just before the close. The SPDR Gold Trust ETF (NYSEARCA:GLD) also declined in the stock market today, down 4%.
Safe-havens, dividend stocks, strong balance sheets, secure income, shiny metal. It doesn’t matter if it’s paper or palladium, they’re getting hit today. Investors are selling what they can, not what they want, as we’ve seen a move from all-time highs to a bear market in record time.
Those on leverage are getting wiped out and we’ll eventually hear which firms went belly up. The high-yield municipal bond fund fell 16.5% today, while the more closely-watched iShares High-Yield Corporate Bond ETF (NYSEARCA:HYG) fell about 4% on the day, and is now down over 8% for the week. Thursday’s low is about $1 above the 2016 low. Below that, and the next lowest mark is from the Great Recession.
All of this comes amid a rapid expansion of volatility. The CBOE Volatility Index (VIX) still hasn’t settled down, up more than 35% and above $75 late in Thursday’s session. That’s the highest it’s been since the recession.
Movers in the Stock Market Today
Apologies on the long-winded intro, but it’s important to highlight what’s going on out there. On an individual stock basis, it’s not getting any easier, either. Not that they would have known, but these companies did not pick an easy time to report earnings.
Broadcom (NASDAQ:AVGO), Oracle (NYSE:ORCL), Adobe (NASDAQ:ADBE), Ulta Beauty (NASDAQ:ULTA) and DocuSign (NASDAQ:DOCU) will all report earnings after the close on Thursday. All of them declined in the stock market today, but investors will be looking for some words of encouragement from management.
Right now, all the news centers around the coronavirus from China. Last night, the NBA announced that it will suspend its season. The NHL and MLB have since followed suit. The NBA’s announcement came right after President Donald Trump’s address to the nation, where he announced a travel ban from Europe, among other things.
The travel ban has had an obviously negative impact on many companies. Airline stocks are again plunging, with Delta Air Lines (NYSE:DAL), United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and others hitting 52-week lows.
Boeing (NYSE:BA) is getting caught up in the destruction too, down over 60% from its 2019 highs and down almost 40% this week. Seriously? Talk about a pain trade.
But think about it. With event after event canceled, it’s more than airlines hurting. Hotel chains like Hilton Worldwide (NYSE:HLT) and Marriott (NASDAQ:MAR) tagged new 52-week lows on the day too. Visa (NYSE:V) and Mastercard (NYSE:MA) are getting hit as investors realize consumer spending is on the way down.
Final Thoughts
As we try to wrap up one of the toughest weeks in years, investors are faced with a challenging dilemma. They know the coronavirus situation is going to get worse in the U.S. before it gets better.
It’s gone from the situation being a temporary hiccup to serious concerns about the system. While it’s not the financial crisis all over again — our real estate market isn’t built on hot air and our banks are well capitalized — there are concerns about liquidity, as the well-oiled consumer-spending machine seizes up and as companies tap into loans and credit lines to stem the dried up cash flows.
We’ve gone from all-time highs to a bear market in 19 trading sessions, the fastest move ever (the prior mark was 36 sessions). We’ve got 72% of securities at a 52-week low. The last time it eclipsed 70% was the financial crisis. This situation doesn’t seem as bad as the financial crisis, but the question now is, when will the market realize that?
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AVGO.
