- S&P 500 futures point to a significantly lower open for the underlying index which would put it in a bear market along with the Dow
- Treasurys, the yen and Swiss franc jump; gold flat
- Oil continues sinking
- The U.S releases PPI figures on Thursday, expected to drop to -0.1 from 0.5%
- The ECB interest rate decision is due at 8:45 EDT. Expectations are for the rate to remain at 0.00%, but in this market environment anything is possible.
- Futures on the S&P 500 Index were down about 5% at 2,623.50.
- The Stoxx Europe 600 Index gapped lower by about 2.75% and extended the drop to 5.6%, fluctuating wildly.
- The Dollar Index was up almost 0.2% after dropping almost 0.5%.
- The euro was down about 0.15% at 1.1245, a third day drop.
- The yen strengthened by 0.6%, climbing for a second day.
- The yield on 10-year Treasurys dropped 17 basis points to 0.725.
- The U.S. 2-year Treasury yield fell 12 basis points to 0.936.
- Germany’s 10-year yield declined 4 basis points to 0.790.
- Britain’s 10-year yield fell 6 basis points to 0.222.
- WTI fell about 5.25% to $31.27, the second day of oil declines for a total drop of 9.1%.
- Gold is down 0.6% to $1,634.60 and wavering. The precious metal is lower for a fourth straight day, losing 2.4% of value.
Key Events
After President Donald Trump disappointed markets yesterday with his underwhelming stimulus measures and his unprecedented travel restrictions between the U.S. and Europe, futures for the Dow Jones, S&P 500 and NASDAQ all fell—the contracts each dropped around 5% or more immediately afterward. As well, SPX futures are indicating that the underlying index will open lower, entering bear market territory and joining the Dow Jones Industrial Average which took that plunge yesterday when it reached a 20% decline on a closing basis, from its peak.
Safe haven Treasurys, the yen and the Swiss franc all rallied, though gold was flat.
Global Financial Affairs
Trump's underwhelming plans—providing some aid for small businesses, asking Congress to pass as-yet undefined payroll tax relief—left the impression that proactive steps for dealing with the public health crisis surrounding the virus were not yet in place while increasing panic because of the dire travel restrictions.
Once again this morning, U.S. futures reached the maximum allowed decline before automatic safety measures halted trade. Ironically, this tends to ramp up the panic.
The 1-Minute Chart clearly illustrates how sharply S&P 500 futures dropped at the open. That was followed by a H&S continuation pattern on the chart, suggesting additional declines.
The Stoxx Europe 600 tumbled more than 6% when trade began, after it had already entered a bear market. The plunge set up a sixth day of declines as travel and leisure shares cratered, a result of the current geopolitcal landscape.
Earlier Thursday, Asian markets were deep in the red as well. Australia’s ASX 200 collapsed, (-7.36%). China’s Shanghai Composite continues to outperorm regional peers, (-1.52%). Japan’s Nikkei 225 shed 4.4% of value, even after the country's central bank provided another liquidity pledge.
Yesterday on Wall Street, stocks plunged after the World Health Organization, (WHO), officially declared COVID-19 a pandemic, after which President Trump failed to deliver on his promise to fight the virus with a substantial fiscal policy.
The Dow's almost 6.0% slump at the close officially sent the mega cap index into a bear market, ending the blue-chip index's 11-year bull run.
The more than 20% fall from its peak also established a technical downtrend, with the final trough entering a downward peak-trough formation.
Yields for the U.S.10-year Treasury dropped. Trading wiped out a day and a half of gains, as investors price in a recession.
The U.S. Dollar Index produced a powerful hanging man—bearish on confirmation of a lower close following—as the dollar whipsawed between U.S. risk asset selloffs and demand for Treasurys. The hanging man’s development along the same line as the low of the year increases the chance of resistance.
Gold moved lower for a fourth straight day, following a second return move to a bullish triangle.
Oil slipped lower after Trump's surprise travel ban compounded the Saudi-Russia production tussle that's flooding markets with cheap oil.