• Thomas Parker

U.S. stocks plunge, global trade drops most in a decade

Updated: Mar 1, 2020

On Tuesday, investors continued to sell U.S. stocks after the DOW had dropped more than 1,000 points the day before, the biggest selloff in two years. The S&P 500 dropped 3.3% on Monday, also the largest one-day decline in two years. Tuesday's trading saw an extension of the rout, with the DOW shedding another 900 points late in the day.

The 10-year Treasury yield traded at 1.335%, close to its all-time low, indicating potentially slower global economic growth.

“The underlying fundamentals are still strong,” said Brent Schutte, Chief Investment Strategist at Northwestern Mutual.

Schutte assured investors that the market conditions before the virus, which he described as "strong," will exist after the panic has ended. "As trade fears faded, we saw a pick-up in leading economic indicators around the world. Here in the U.S., the housing market has put up robust numbers for several months now, the consumer remains strong and small business owners remain optimistic about the future."

Analysts are placing the blame on the coronavirus, which has infected over 80,000 total and claimed the lives of over 2,700. However, other indicators suggest that reduced economic activity was already a possibility, virus or not.

Global trade in 2019 dropped for the full year, the first time that has happened since 2009. Figures from the CPB World Trade Monitor show trade volumes fell 0.4% last year, following growth of more than 3% in 2018.

The decline in global trade is partially due to a trade war between the United States and China, as well as an industrial downturn in Germany.

Consumer confidence in February came in lower than expected. The consumer confidence index from The Confidence Board released on Tuesday rose to 130.7, up from 130.4 in January. Economists expected a jump to 132.6 for the month.

Mastercard and United Airlines are the latest companies to warn that revenue may be reduced due to the virus, with United Airlines scrapping its 2020 profit forecast entirely.

Despite market panic over the coronavirus, the number of active cases of the virus as well as the death rate are now on the decline. Barring a jump in the number of infected, the number of cases has declined over the past two weeks from a high of over 58,000 to under 50,000, while the death rate has declined from over 12% to under 9% in the same period.

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