Before The Bell - What a week it has been. And we have only been through three sessions on Wall Street thus far over this five-day span. On point, after the Dow Jones Industrial Average plummeted a record 2,997 points on Monday, driving that index to its third worst percentage drop ever, and the worst showing since the stock market crash in October, 1987; the Dow would jump by 1,049 points on Tuesday. Behind the Monday drop were spreading coronavirus fears; the Tuesday comeback, meantime, was helped along by indications that additional fiscal aid stimulus would soon be on the way.
However, as the toll from the disease continues to mount and fears of a major economic downturn increase, the market resumed its downward path on Wednesday morning, with the Dow quickly falling to a late-morning decline of more than 1,400 points. At that time, the Dow's descent was a bit larger in percentage terms than either the S&P 500 or the NASDAQ. In all, the latest drop again saw the Dow fall below the 20,000 mark. The bear market has taken about a third of the value off of equities in just the past month. Leading the way lower again was entertainment behemoth Walt Disney (DIS), with that issue falling another $7.00 during the morning. All told, the stock has tumbled from $153 to $86 in a matter of weeks.
Meanwhile, economic news continues to flow in. Thus, as the government reported a drop in retail spending in February, it also noted that industrial production increased by 0.6% that month. To be sure, the later result was reassuring, but we should note that the effects of the coronavirus, or COVID-19, were still rather limited in February. A month from now, when we get the next retail and industrial output reports, the outlook will be more telling. Through all of these reports, Wall Street remains focused only on the virus, and as we hit the noon hour in New York, the blue chip index was still off by more than 1,100 points.
The early afternoon would then bring further losses, with the Dow tumbling by more than 2,000 points after the daily White House briefing. As before, shares of media and tech giants were under intense pressure. All the while on the disease front, global cases now surpass 200,000, with the death toll over 8,000. Further, numerous stores have announced that they are closing their stores or cutting hours to help limit the spread of this virus. AS to individual stocks, Disney's fall continued with the issue tumbling by more than $13 at its mid-afternoon lows. Also shares of Boeing (BA)were off a staggering 25%.
The selling, which has its nadir sent the blue chips down by some 2,300 points, abated near the close, with some last-minute buying, which pared the final Dow loss to 1,338 points. The NASDAQ, once off over 600 points ended matters in the red by 345 points. In sum, the full-day selloff says that the Street is still under intense pressure from fears about COVID-19. The late buying says that there is the potential for a sizable comeback at any point as stocks are way oversold. Indeed, both Disney and Boeing pared their losses nicely at the close.
Looking out to a new day and after some initial strength in the futures last night, these indicators again have turned negative, suggesting a weaker opening when trading resumes this morning. - Harvey S. Katz, CFA