Market Brief: March 20, 2020

A daily summary of news, analysis and data shaping the market.
Market Brief
Friday, March 20, 2020
Rough Week. U.S. stock indexes dropped in response to a renewed fall in the price of oil and after New York Gov. Andrew Cuomo ordered all nonessential businesses in the state to close. Friday’s losses capped off the worst week for the Dow Jones Industrial Average and S&P 500 since the 2008 financial crisis. On Friday, the Dow Jones Industrial Average fell 913 points, or 4.4%, to 19,173. The S&P 500 was down 4.3%, and the Nasdaq Composite, which has outperformed the other major indexes in recent days, was off 3.8%. For the week, the Dow dropped more than 17%, while the S&P 500 fell 15% and the Nasdaq dropped more than 12%.
DJIA 19,173.98 -913.21
S&P 500 2,304.92 -104.47
NASDAQ 6,879.52 -271.06
US 10-Year Note 0.88 -0.28
Dollar Index 102.75 -0.00
Crude Oil 19.84 -5.38
Gold 1,489.00 9.70
Global Dow 2,204.75 -19.26
Powered by Dow Jones Research, FactSet, Eurostat, SIX Financial Information.
U.S. Oil Prices Post Weekly Loss of 29%, Biggest Since 1991
Oil settled sharply lower on Friday, with U.S. prices down 29% for the week—the largest weekly loss since 1991—as economic stimulus plans from government and central banks fail to offset expectations for steep fall in demand due to coronavirus pandemic, and as Saudi Arabia and Russia oversupply the market.

Prices for U.S. benchmark West Texas Intermediate crude just a day earlier had posted their largest one-day percentage rise on record, partly due to comments from the Trump administration, which indicated that it was considering intervention in the oil-price war between Saudi Arabia and Russia.

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The Fed Is Now Buying Munis, More or Less
The Federal Reserve is expanding its program to bolster money-market funds by extending its support to municipal debt, as well.

The Fed’s original money-market lending program, introduced late Wednesday, was created to finance banks’ purchases of short-term corporate securities known as commercial paper (specifically from money-market funds). After this latest expansion, the Fed will also finance similar bank purchases of municipal debt maturing in less than one year.

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Higher Treasury Yields Send a Hopeful Signal to Markets
Treasury yields rose this past week while stocks slid. That’s the opposite of the usual pattern when risky assets, such as equities, come under pressure. Normally, investors flock to the haven of government securities, pushing their prices higher and their yields lower. But this time, that relationship unraveled, with longer-term Treasuries failing to appreciate and to provide a cushion against falling stocks.

Jim Paulsen, the Leuthold Group’s chief investment officer, sees the upturn in longer-term Treasury yields as a glass-half-full story. The history of market crashes since 1987 shows that the 10-year note’s yield turns upward as a bear market is close to running its course, he writes in a client note.

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WHO Says There Are 7,000 U.S. Coronavirus Cases. Johns Hopkins Says It’s Twice That.
New Covid-19 cases diagnosed outside of China continue to rise. More than 16,000 were diagnosed Thursday, according to the World Health Organization daily situation report. It’s the first time the number breached the 16,000 level. The escalating outbreak prompted U.S. officials to recommend no international travel for U.S. citizens.

The number of cases in the U.S. more than doubled to 7,087 on Thursday, jumping by 3,551. It’s a huge jump, but the roughly 7,000 cases recorded by the WHO are only about half the number tallied by the Johns Hopkins Center for Science and Engineering database.

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What the U.S. Can Learn From China’s Response to the Coronavirus Pandemic
As the U.S rushes to slow the spread of the deadly novel coronavirus, it has unleashed a kitchen-sink array of measures to stave off severe economic damage from the pandemic. Investors grasping for a road map—and perhaps a bit of optimism—as to what comes next have settled on China, whose economy is restarting while the rest of the world is shutting down. But economists and fund managers warn the U.S. could be in for an even longer and bumpier path to recovery.

First, the good news: The number of new confirmed cases of the coronavirus in China has slowed considerably, and that suggests the risk from the virus isn’t indefinite. “It’s the uncertainty for what the virus is engendering that’s creating market chaos, but the important thing is that it’s a fading virus,” Alan Greenspan, former Federal Reserve Chairman and advisory board member at RockCreek, a $14 billion investment firm, said in a video to the company’s clients. “The book will close on this, but not right away.”

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Honeywell, 3M, and GE Ramp Up Effort to Produce Hospital Supplies
Ahead of potential shortages for supplies and equipment needed for hospitals to treat Covid-19 patients, a group of public companies are looking at ways to help.

Manufacturers Honeywell International and 3M are stepping up production of N95 industrial face masks—which Vice President Mike Pence says can now be sold directly to hospitals in need. General Electric said its GE Healthcare subsidiary is committing more production lines to ventilators and adding shifts so lines can be active 24 hours a day.

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GE’s $20 Billion Division Sale Approved by Regulators
U.S. antitrust regulators cleared General Electric’s biopharma division sale to Danaher Thursday evening. The deal, which will bring $20 billion into GE’s coffers, is now slated to close March 31, in line with management’s expectation.

“Today’s update represents a critical milestone on our journey to transform GE,” said General Electric CEO Larry Culp in a news release. “The value from this transaction will fortify our considerable sources to de-risk our balance sheet and continue to solidify our financial position.”

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AT&T Suspends Stock Buyback Plan
AT&T shares are trading lower after the communications and entertainment giant announced that it has canceled a previously disclosed $4 billion accelerated share-repurchase agreement, as well as “any other repurchases.”

Even before the current coronavirus pandemic added new stresses to the financial markets, AT&T faced a pair of competing financial challenges: reducing its $163 billion debt position, while also maintaining its dividend, which currently provides investors with a 6.7% yield.

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Carnival’s First-Quarter Earnings Were Halved. It’s an Early Glimpse of Coronavirus Impact.
Carnival’s adjusted fiscal first-quarter earnings were cut in half because of the coronavirus hit, giving the first glimpse of how cruise operators fared as the pandemic intensified in recent weeks.

In a securities filing after the market closed Thursday, Carnival preannounced adjusted earnings of 22 cents a share, compared with 49 cents a share a year earlier. It added that the cornonavirus outbreak cost 23 cents a share, including canceled voyages, but the results exclude ship impairment and goodwill charges.

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Don’t Worry, You’ll Still Get Your Social Security, Even With the Coronavirus Crisis
The Social Security Administration’s commissioner wants you to know you’ll still get paid, but the agency is changing a few other policies in the midst of the coronavirus crisis—and wants recipients to be aware of potential threats to their financial security too.

“The first thing you should know is that we continue to pay benefits,” said Andrew Saul, commissioner of the Social Security Administration, in a statement on Thursday.

This is true whether Americans are receiving their Social Security benefits or Supplemental Security Income payments via direct deposit or mail, though they should check in with the U.S. Postal Service for any updates as well. Right now, the USPS is “closely monitoring” the coronavirus, also known as Covid-19. The Surgeon General, World Health Organization and Centers for Disease Control and Prevention have all said there’s currently no evidence the disease can spread through mail.

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