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Investors prepare for more market swings as virus spreads in the U.S.

EconomyMar 15, 2020 01:47PM ET
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© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) after the opening bell of the trading session in New York

By Kate Duguid

(Reuters) - With one of Wall Street's wildest weeks in recent memory now in the history books, investors are bracing for more uncertainty and big market swings ahead.

Overwhelmingly, caution remains the watchword for investors and analysts reeling from a week that saw all three U.S. exchanges confirm bear markets, oil prices plummet to multiyear lows and wild fluctuations in bond yields and currencies. (N)

Investors still have little clarity on the possible trajectory of the coronavirus outbreak in the United States, the effectiveness of the government response and the eventual damage the virus will cause to the nation's economy and individual companies.

Many are awaiting the start of trading in U.S. stock futures on Sunday night, a session that has proven volatile in recent weeks.

"Right now, we view investing in the current environment using the hackneyed phrase of 'catching a falling knife,'" said Richard Bernstein, chief executive of Richard Bernstein Advisors in a note to investors and conference call. "We see no need to rush into markets."

Bernstein said the rush into U.S. government bonds sparked by recent market swings has overstretched the prices of Treasuries, which now sport yields near record lows. His portfolio holds shorter-dated U.S. debt and equities in the consumer staples and health care sectors, among others.

The White House on Saturday said it would extend a travel ban to include the United Kingdom and Ireland, a move that could further hurt oil prices and airlines already battered by a ban announced last week.

Analytics firm Oxford Economics also discouraged dip buyers, noting in a report that companies' price-to-earnings ratios remain elevated and corporations may eventually find it difficult to service their debt at a time when leverage is near all-time highs. The firm urged investors to trim exposure to a broad variety of asset classes, including European stocks and the local currency debt of emerging markets.

They are also warning investors to brace for more alarming headlines concerning the virus' spread in the United States.

"In the foreseeable future, and with a vaccine for the virus still nowhere in sight, it is reasonable to assume that Western containment strategies are unlikely to succeed and the peak in the incidence is at least some weeks, if not months, away," the firm said.

Others are continuing to watch for signs of stresses across markets.

Analysts at Bank of America (NYSE:BAC) wrote that the Federal Reserve may announce measures on Sunday night aimed at bolstering liquidity in the commercial paper market, used by companies for short-term loans.

The measures, if taken, would be aimed at buffering the market ahead of potentially large outflows from money market funds in coming days, the Bank of America analysts wrote.

The United States has in recent days received a taste of the types of disruptions that the virus has wrought in other countries, including Italy and South Korea.

Daily routines have been upended as businesses including Amazon.com (O:AMZN) urge employees to work from home, schools and universities close, and sporting events and church services are paused across the country. In response to the run on certain items, major retailers have imposed some purchase limits.

"Americans should be prepared that they are going to have to hunker down significantly more than we as a country are doing," Dr. Anthony Fauci, the nation's top infectious diseases expert, said on NBC's "Meet the Press" on Sunday. With limited testing available, officials have recorded nearly 3,000 cases and 59 deaths in the United States.

Investors have cheered moves by the Federal Reserve to add liquidity to markets and promises of fiscal support from the U.S. government, with markets ripping higher on Friday as President Donald Trump declared a national emergency.

U.S. Treasury Secretary Steven Mnuchin told "Fox News Sunday" the cost of a coronavirus aid package will likely be "significant but not huge."

The Fed is expected to announce an interest rate cut of at least three quarters of a percentage point this week, with financial markets predicting the Fed will be forced to cut to zero by April to boost the economy.

Some investors are looking for value in the wake of the market's big drop.

Analysts at BTIG believe the time is right to step in to some of the market's hardest-hit areas including financial stocks, which they said could benefit from lower interest rates.

Retail investors appear to be somewhat more optimistic than their institutional counterparts, a poll by wealth management research firm Spectrem Group showed.

Fewer than 10% of investors polled by the firm earlier this month sold equities while 17% purchased stocks in the recent selloff, the poll showed.

"This infers that institutional investors are causing the market volatility rather than retail investors," the firm said in a report.

Meanwhile, business owners saw the coronavirus as a serious threat to the economy, a survey from Wilmington Trust showed.

Thirty-six percent of the respondents in the survey, which targeted owners with businesses generating more than $5 million in revenue, said they anticipated reducing employment levels in the first half and 39% said they would cut back capital expenditures.

Investors prepare for more market swings as virus spreads in the U.S.
 

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Comments (9)
Chuck Barnes
Chuck Barnes Mar 15, 2020 11:22PM ET
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Suspend trading for one week. If market starts freefalling again, suspend trading for another week.
lewis palmer
lewis palmer Mar 15, 2020 3:38PM ET
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good luck genius
johnny kay
johnny kay Mar 15, 2020 2:53PM ET
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this is good for a lot of companies.....it will be stable
db cooper
db cooper Mar 15, 2020 1:53PM ET
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SOON TO BE DEAD NEWS.   APPLE has announced  that they have re-opened ALL their stores in China because the risk of corona virus is now so low, and 100% of all travellers from out of the country are being forced to attend 14 day quarantine..........and Canada where I live, a population of 37.5 MILLION PEOPLE STILL HAS ONLY ONE CORONA VIRUS DEATH...............ONE - OUT OF 37.5 MILLION  PEOPLE -  SO LET'S STOP THE B/B/S  of trying to spread mass hysteria...........
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John Mars
John Mars Mar 15, 2020 1:53PM ET
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Someone held their long position over the weekend.
John Mars
John Mars Mar 15, 2020 1:53PM ET
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Didnt you get the memo? People want toilet paper not iphones.
Pramukh Investments
Pramukh Investments Mar 15, 2020 1:53PM ET
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Genius DB cooper!
Pramukh Investments
Pramukh Investments Mar 15, 2020 1:53PM ET
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Zombie apocalypse is here!
Paul Wall
Paul Wall Mar 15, 2020 1:53PM ET
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Triplicis Mundi Summum they reopened in China. you must have missed the news...
Pawan Jain
Pawan Jain Mar 15, 2020 1:50PM ET
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omg....again...may be down...
Tong Nguyen
Tong Nguyen Mar 14, 2020 9:12PM ET
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Stop short selling then everything will be fine
First Last
First Last Mar 14, 2020 9:12PM ET
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sorry but the charts suggest otherwise...it's all all about what's real and not what you feel... after the crash we can go back to the usual bull markets.
John Whitfield
John Whitfield Mar 14, 2020 9:12PM ET
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so short selling is good at a time that a virus targets elders we should pressure their 401k and means of survival when they need it the most.
Prashant Khade
Prashant Khade Mar 14, 2020 9:12PM ET
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🤣🤣🤣🤣🤣🤣
Vladislav Molitvik
Vladislav Molitvik Mar 14, 2020 9:12PM ET
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You shall be flexible and adjust to market. We live in capitalism - you can do whatever you want. Markets are not supposed to always go up
Philipp Petzold
Philipp Petzold Mar 14, 2020 5:26PM ET
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WeEkEnD dOw
Fairway TradeUS
Fairway TradeUS Mar 14, 2020 4:50PM ET
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We are selling calls for our clients for weekly Expiration dates
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James Gomez
James Gomez Mar 14, 2020 4:50PM ET
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I'll be selling Puts
shaheda maroof
shaheda maroof Mar 14, 2020 4:50PM ET
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Sell calls and puts on choppy market, sell puts on gap ups, like Friday at 3pm! Best of Luck, stay dmall.
shaheda maroof
shaheda maroof Mar 14, 2020 4:50PM ET
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Small
Chuck Barnes
Chuck Barnes Mar 14, 2020 4:50PM ET
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Im putting the put on put off. 🤪
taylor jason
taylor jason Mar 14, 2020 4:50PM ET
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sounds like a terrible idea granted the virus hasnt peaked and there is no clear bottom
David David
David9 Mar 14, 2020 4:49PM ET
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From this point in, if there is a wide swing, it is all buy buy buy time, then sit back relax and see 20% gained by year end.
Patron Silver
Patron Silver Mar 14, 2020 4:49PM ET
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maybe with dumptruck out of the way
db cooper
db cooper Mar 14, 2020 4:49PM ET
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Best idea !
Joeri Willems
Jurinho Mar 14, 2020 4:49PM ET
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if i look at the regular path of a wall street bear in action - last one was 11 years ago.. after the longest bull run ever .. where everyone said if it comes it will also be the most frantic bear run ever .. - you are now at -20 percent, and the most likely bottom of this bear will be between 50 and 65 percent lower. You might get lucky on a nice up run but at this level, it seems too soon. Most likely it will fall another 10-20 percent to then only go up in april or may - if the virus cant handle better weather - if.. - for about 15-25 pct. To then go back down, more slowly.. because the economy is unable to get back on its feet from this. To then finally, next winter, see all ******break loose when the corona virus is back and much much stronger present. The bottom will be literally the day a vaccine is discovered, in 2021.
Vladislav Molitvik
Vladislav Molitvik Mar 14, 2020 4:49PM ET
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Seems like another "expert" recommending people to buy dip for their 401K accounts at the end of February
 
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