It looks like this coronavirus won’t be as short-lived as we all hoped a few weeks back, as spreading outside of China led the major indices to their worst performances in years.
So this is why investors have been hesitant to stick their necks out on Fridays. Over the weekend, the sickness spiked in South Korea and is even gaining ground in a European country like Italy.
Stocks were having none of it on Monday. They’ve been worried that this virus would impact the global economy ever since it came on the scene, and they weren’t going to just hope for the best today.
The Dow plunged by 3.56% (or more than 1031 points) to 27,960.80. We haven’t seen this type of pullback since the correction of February 2018, when the index plunged more than 1000 points twice in the same week.
The S&P slipped 3.35% to 3225.89. Both this index and the Dow are now negative for 2020.
The S&P is just about 5 points in the red for the year, but the Dow is now off by around 2%.
Ironically, the NASDAQ had the worst session on Monday, but it’s the only major index that’s still positive for the year… and by a good amount.
It plunged 3.71% (or about 355 points) to 9221.28 on a terrible session for tech staples like Tesla (NASDAQ:TSLA, -7.46%), NVIDIA (NASDAQ:NVDA, -7.07%), Cisco (NASDAQ:CSCO, -4.96%), Apple (NASDAQ:AAPL, -4.75%) and Microsoft (NASDAQ:MSFT, -4.31%).
But the NASDAQ is still up more than 2% this year.
Investors finally got the pullback that many had been hoping for. Unfortunately, it wasn’t brought about by the normal ebb and flow of the market, but by an unpredictable virus with no end in sight.
Whether its “V-shaped” or not, stocks will recover from this coronavirus once its contained, just as they did during other health concerns like SARS in the early 2000s.
However, until they get a hold on this sickness, we will likely see much more volatility.
Today's Portfolio Highlights:
TAZR Trader: Many of the editors have been waiting for this type of pullback to put some money to work. Case in point, Kevin added a couple of names on Monday as stocks slide more than 3% during coronavirus fears. He bought software data mining engine Splunk (SPLK) and added to self-service data analytics provider Alteryx (AYX). The editor will be buying more ideas as stocks continue to drop. Read the full write-up for more specifics on today’s moves.
Black Box Trader: This week’s adjustment included three changes. The portfolio sold the following stocks:
• Signet Jewelers (SIG)
• Tempur Sealy (TPX)
• Spirit Airlines (SAVE)
These spots were immediately filled on Monday by the additions of:
• Legg Mason (LM)
• Mattel (NASDAQ:MAT)
• SunPower (SPWR)
Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.
Counterstrike: "While this all seems like a reason to run around screaming with our hair on fire, we should try to remain calm and put things in perspective. The drop today comes after a massive run up in stocks and I would say that even without the virus, we were due for a pullback like this. I don’t like seeing it all in one day, but it was time for gravity to set in.
"Looking forward, there are two ways to go from here. In the past, we see V bottoms and a quick rally back to highs. However, this will be difficult if the news gets worse. So, we have to monitor what’s happening around the world. The spreading over the weekend in South Korea and Italy is what triggered selling today. So, if the UK, France and Russia were to see similar outbreaks, there will be more selling.
"Eventually we will see more cases in North America, but the question will be if there is widespread outbreak. If so, people will stay home and economic activity will grind to a halt. This is the fear and the uncertainty the market has to deal with.
"The good news is China has seen some slowing of cases, so if spreading can stop as spring approaches, maybe we can move past this." -- Jeremy Mullin
All the Best,
Jim Giaquinto
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