Equities Plummet, Virus Fear Is Rising Fast, The Earnings Outlook Is In Jeopardy

The U.S. Futures Are Down Hard

The U.S. futures are down hard in early trading as rising fear of economic fallout from the coronavirus grips the market. The Dow Jones and S&P 500 are both down about -2.80% in early trading while the NASDAQ Composite leads with a loss of -3.10%. The NASDAQ Composite is getting hit hardest due to its overweigthing in technology and internationally-based companies.

The global tally of infected has now topped 100,000 and rising. The number of dead was last reported at 3387 with 12 dead in the U.S. New York revealed their case tally has risen to 12 while California continues to crack down with its state of emergency. Internationally, Egypt is the latest to report new cases as viral spread in the Middle East accelerates. Iran and Italy remain the hardest hit outside of Asia but they may change any day.

The risk from the virus isn’t the illness itself, it is the impact on activity. The illness is less harmful than flu although much more contagious. At the current rate, we can expect it to have moved through the world’s population within the next two to three months. Until then, traders are eyeing impediments to businesses that will have an impact on future earnings.

Stocks On The Move

Today’s action is being led by travel and leisure stocks as well as the energy sector. Shares of air-carrier American Airlines and Connoco-Phillips are both down more than -5.0% while Las Vegas Sands trails at only -4.5%. Starbuck’s is the first to warn of an impact to 2nd quarter earnings but not the last. With earnings pressure extending to the 2Q, we can be sure the sell-off isn’t over yet.

In other news, Costco reports they are “beyond busy” as stockpiling and hoarders ramp up demand. Customers are preparing for extended stays at home and the possibility of mandatory quarantines.

The Labor Data Is Strong

Today’s data is dominated by a blow-out labor report. The employment situation summary, also known as the NFP, came in at a mind-bending 277,000 and 100,000 above consensus. Along with that, the unemployment rate fell to 3.5%, wages rose 0.3% MOM, and upward revision to previous data padded the report.

Regardless the data, the dollar continues to fall. The DXY is down hard over the past few days due to the FOMC’s surprise rate cut. The FOMC is expected to cut rates again as soon as two weeks at the March meeting in an effort to fight the economic impact of the virus.