The stock market has finally come to grips with the notion the coronavirus is not contained. Cases are rising exponentially in South Korea, Italy, Japan, and Iran.
Equities Smashed, Gold Jumps
- S&P 500: -3.2%
- Nasdaq: -3.74%
- Dow: -3.14%
- Gold: +$26 to $1675, +1.59%
- West Texas Crude: -$2.66 to $50.72, -4.98%
Numbers from 11:00 AM Central.
30-Year Bond Yield at New Record Low
Recession Bells Yet Again
The above chart is from Friday.
Inversions do not look as tight because in the prior two recession the 30-year bond inverted with the 3-month.
Even with today’s record low move there is still 23 basis points of spread between the 30-year and the 3-month yield.
There is also 45 basis points between the 30-year and 10-year.
Largest Shipping Decline Since 2009
Please note we have already witnessed the Largest Shipping Decline Since 2009 and That’s Before Coronavirus hit.
Recession is calling.
Mike “Mish” Shedlock
Past Time to Tell the Public: “It Will Probably Go Pandemic, and We Should All Prepare Now” https://virologydownunder.com/past-time-to-tell-the-public-it-will-probably-go-pandemic-and-we-should-all-prepare-now/
The fact that the 30 year bond has reached this low of a yield shows me prove positive that whoever buys those thongs are desperate and idiots at the same time.
It’s NOT the virus that’s causing the sell-off. It’s the increased probability that Bernie wins the nomination.
Hard to believe all the CoV talk here this past month and nobody is mentioning Biotech stocks today! Go biotechs!
VXRT up 16%
NNVC up 36%
GNPX up 20%
CODX up 6%
The miners don’t believe in this gold move. GDX should be pushing $40 and it can barely get past $30. Short term hysteria with no staying power.
Most gold miners never make any money mining gold. Mining gold is usually a money losing business.
It’s not that they don’t believe – it’s that they’d already run up in tandem with the broader stock market and have pulled back.
As of right now, SPX is about even with the beginning of the year, DJIA is down 2%, RUT is down 3%, and DJTA is down 4%. Meanwhile, DJUA is up 8%. Yes, it’s an off day, but considering that we aren’t far at all from where we were 2 months ago when no one had even heard of SARS-COV-2, there could be a lot more to come.
The worst day ever for the Dow is off 22.6%. Number 20 on the list of worst days is off 6.91%. We aren’t even at half that. There may well be a panic ahead, but this isn’t even close…yet.
Coronavirus won’t impact the market on a single day to that extent. It will be death by a thousand cuts, perhaps both proverbially and literally, over several months. This has global recession written all over it like 2007-2009. Central banks will need to step up to keep the economy afloat. Companies that deliver everything (e.g. Amazon) will prosper.
I’m ambivalent as to whether there will be “panic”, or just a bear market. Baby boomers are close to retirement, and they may very well get a bit excited after some of those “thousand cuts”. Let’s hypothetically say we get another down day tomorrow, a mild rally Wednesday, and then a couple more down days on Thursday and Friday. Let’s also say that by the weekend the SARS-COV-2 news is worse, perhaps with 50 cases in a new country, and perhaps a few in the wild in the US. In that scenario, next week we might see some big negative numbers.
On the other hand, we could also see what you are describing, a typical bear market, with stocks up and down, but more down than up, and SARS-COV-2 doing the same, getting a bit worse, a bit better, and spreading only slowly.
I do have a long position in RWM, and in Gold, so I am hedged. I’m not going to get excited regardless of what happens. I looked into a company I once interviewed with, HI, which seemed like the perfect investment. They once were the largest maker of Caskets, and the largest maker of hospital beds. Now it seems they sold off HRC, and got into industrial containers instead, so i decided I wasn’t interested.
Looks like the market finally noticed the virus. I guess hitting South Korea and Italy over the weekend woke the bear from hibernation.
Does anyone else see the irony in the fact that a virus (extremely tiny molecule) is bringing the world economy to its knees? Really giant balloon, meet extremely fine needle… pop.
Reminds me of ‘The War of the Worlds’ by HG Wells, circa 1896. Humans are getting wallopped by an alien race when they invade Earth. In the end, the aliens succumb to an earth virus for which they have no immunity and the human race survives. The power of a tiny molecule, indeed!
Already outdated chart, the Dow crossed the 1000 down. If the money is fleeing the stock market, bond yields down, where is the money flowing?
Money markets.
Seems like gold, too. While I am waiting for the dip…
Yes. Fear trade is definitely on.
Bond yields, treasury yields rather, are down because money is shifting from shares into treasuries. Corporate bonds, junk bonds in particular, are probably being sold too, with yields going up, haven t checked yet….
Bond yields work differently. If yields are down, it’s because the price is up.
Flowing into bonds. Yields go down when bonds are bid.
Monetary policy crashes into demand destruction.
Demand destruction is caused by borrowers who have so much debt that they can’t repay it. Can’t borrow money=no demand for goods and services.