US stocks will be in focus today, with the Dow suffering its worst decline since the 1987 Black Monday crash yesterday.
Context: US stocks plummeted on Monday, despite the Federal Reserve announcing a massive stimulus plan and cutting interest rates to almost zero to help support the economy amid the COVID-19 outbreak.
Details: The Dow surpassed its 9.99% drop last Thursday by falling 12.9% on Monday. Investor sentiment remained negative despite the Federal Reserve’s efforts to support the economy. In a surprise move on Sunday, the Fed cut its benchmark rate to almost zero to curb the economic slowdown. This followed the central bank’s emergency rate cut earlier this month.
The Fed also announced a $700 billion quantitative easing program that entailed asset purchases of Treasury and mortgage-backed securities. The markets remained unimpressed by these plans and chose to focus on President Donald Trump’s comments around coronavirus crisis extending through August.
Monday’s decline put the Dow 31.7% lower than its record high last month. The Dow also reached its lowest level since 2017. Trading in the market was halted shortly after the opening bell for 15 minutes following an 8% decline in the S&P 500 index.
The Dow plunged 12.93% to settle at 20,188 on Monday, while the S&P 500 fell 11.98% to 2,386. The Nasdaq 100 nosedived 12.32% to close at 6,904.
Coronavirus cases in the US have exceeded 3,700, with 69 deaths. The CDC (Centers for Disease Control and Prevention) has requested the canceling or postponing of events with gathering of more than 50 persons.
Banking stocks took a hit on Monday, with shares of Bank of America, Morgan Stanley, Citigroup and JPMorgan Chase all tumbling more than 14% each. Apple’s stock was down 13%. Airline stocks recovered slightly from their lows, after President Trump assured the market that the government would backstop the airlines.
Goldman Sachs downgraded its US GDP forecast to 0% growth in the first quarter and to a contraction of 5% in the second quarter. Its GDP forecast for the year was lowered from 1.2% to 0.4%.
What to watch: Investors will be watching the major US indices very closely today, as there could be a small recovery after Monday’s sharp slump. US stock futures also point towards a higher open this morning.
Investors await some positive economic reports from the country, including industrial production, retail sales, business inventories, job openings and housing market index. US retail sales, which rose 0.3% in January, are expected to rise 0.2% in February. Industrial production is likely to increase 0.4% in February, versus a 0.3% decline in January. The number of job openings, which fell by 364,000 to 6.423 million in December, is expected to increase to 6.476 million in January. The NAHB housing market index is projected to fall to 73 in March, versus a prior reading of 74. Business inventories are expected to fall 0.1% in January.
Other Markets: European indices were trading lower at 10:10am GMT, with the FTSE 100, German 30 and French 40 down by 1.16%, 1.20% and 0.73%, respectively.