Worst Single Day Since 1987

Despite emergency liquidity move by the Fed, today's Stock Plunge is Worst Single Day Since 1987.

The furious falls in share prices on rising fears of a global slowdown due to the rapid spread of coronavirus occurred despite a $1.5 trillion intervention in short-term funding markets by the Federal Reserve.

For the day, the Dow industrials shed 2,352.6 points, or 10% to 21,200.62. The S&P 500 sank 260.74 points, or 9.5%, to 2,480.64. And the Nasdaq Composite slid 750.25 points, or 9.4% to 7,201.80.

Companies most exposed to the coronavirus outbreak were particularly hard hit, and airline and cruise shares helped lead the tumble. United Airlines Holdings dropped 25%, Delta Air Lines fell 21%, and Spirit Airlines tumbled 33%. Royal Caribbean Cruises plummeted 32%. On Thursday, Princess Cruises canceled all voyages for the next two months after two of its ships suffered coronavirus outbreaks.

But few parts of the market were immune. All 11 sectors of the S&P 500 tumbled, with losses led by the real estate and industrial sectors. Even companies that investors thought would reap the benefits of the virus tumbled. Clorox ended the day down 6.3%. Gilead Sciences, which has started testing a virus treatment, fell 6.1%.

Illogical Comments of the Day

“We are beyond the logical, mathematical approach to things,” said Steven Dudash, president of Chicago-based IHT Wealth Management. “We’ve got complete overreactions going on because of the fear of the unknown.”

“When you see that, you can’t expect to see a logical response to interventions,” he said.

If you do not know what is going to happen, how many people will die, or how long this will last, how the hell can anyone say the market reaction is illogical?

Who's to Blame?

A friend of mine commented today that you cannot blame the Fed for the coronavirus.

That's true enough.

But you can blame the Fed for blowing three massive bubbles in succession, each bigger than the prior one, in the nonsensical idea that something must be done about deflation.

Economic Challenge to Keynesians

RECOMMENDED ARTICLES

Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.

My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.

BIS Deflation Study

The BIS did a historical study and found routine deflation was not any problem at all.

“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.

Deflationary Outcome

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.

Deflation is not really about prices. It's about the value of debt on the books of banks that cannot be paid back by zombie corporations and individuals.

That is what the Fed fears. It takes lower and lower yields to prevent a debt crash. But it is entirely counterproductive and it does not help the consumer, only the asset holders. Fed (global central bank) policy is to blame.

Assessing the Blame

I don't blame the Fed for the coronavirus.

However, I do blame the Fed for its erroneous inflationary tactics that blew three of the biggest economic bubble in succession: 2000, 2007, 2020.

Fiscal policies helped as well. Trump's stimulus that went to corporations and the wealthy also fueled the stock market.

So if you want another finger to point, that's the one. But it is secondary to cheap money.

Mike "Mish" Shedlock

Existing Home Sales Plunge 3.2%: Worst January Since 1999

Economists expected last year's strength to continue. It petered out in December and the floor fell out in January.

Stock Market Erases All Gains of 2019

The S&P 500 rose almost 29% in 2019. Today those gains were erased this morning but now stocks are off the lows.

What Event Will Sink the Stock Market? Yields? Tariffs? Trump?

The answer is not yields, tariffs, war, famine, or Trump; although any of those could contribute to the selloff.

S&P 500 Slips into Bear Territory on Worst Christmas Eve Trading Ever

The S&P 500 went into bear market territory today on the worst Christmas Eve trading session ever, percentage-wise.

French Manufacturing Slumps 1.8%: Worst Quarterly Drop Since 2012

French manufacturing fell 1.8% in the first quarter. Industrial Production fell 1.2%, the worst start in 6 years.

Dow Erases All Gains Since Trump Took Office

The DOW broke through a level first reached as Trump Took office.

Stock Ownership Rate Plunges as Credit Card Debt Soars

The savings rate is at a 12-year low. Revolving credit is at a record high and the stock ownership rate has plunged.

Manufacturing ISM Worst Since 2009 on Severe Contraction of Export Orders

The Manufacturing ISM is in the second month of contraction and the worst since June of 2009.

Bitcoin: A Leading Stock Market Indicator

Bitcoin is useless as a payment mechanism. It is not a store of value despite such promotion. Tom McClellan found a use.