Outright panic around the coronavirus gripped the US Equity Markets last week, as most sporting events in the US were cancelled, a ban on most flights from Europe was implemented, and investors feared an imminent recession. As a result, the markets suffered their worst single day since 1987 and entered bear market territory before a late day rally on Friday on the hopes of government stimulus and concrete actions to combat the coronavirus. The S&P 500 fell 8.8% for the week, bringing losses for the year down to 16.1%. The Nasdaq dropped 8.2% for the week and is now down 12.2% for the year, while the Russell 2000 (small-cap stocks) plunged 16.5% for the week to bring its losses for the year to 27.5%.
Global equity markets suffered worse than US markets last week, as a new oil price war that was triggered by Saudi Arabia caused another 21% drop in oil prices and compounded investors' fears already stoked by the coronavirus. Developed Markets declined 20.4% for the week alone, bringing its losses for the year to 27.3%. Emerging Markets dropped 15.0% for the week and is now down 20.8% for the year.
After hitting new record lows early in the week, US Interest Rates actually closed the week notably higher despite the Federal Reserve announcing that it would be injecting $1.5 trillion in the markets to ensure capital availability while the US deals with the coronavirus. The yield on the US 10-Year Treasury closed at 0.99% vs. 0.71% the prior week. The Fed will be holding its periodic meeting on March 17-18, and it is widely expected that the Fed will announce further rate cuts.
Of Interest to Us
According to AAA, the average price of a gallon of gasoline has declined over 6% in the past two weeks, with expectations that further declines are likely given the significant drop in oil prices. At the same time, the decline in interest rates has caused mortgage refinancing activity to spike 79% over the past week and 479% from a year ago. While the coronavirus will likely cause a sharp slowdown in economic activity in the near-term, the US consumer should likely be in even better financial shape once we get to the other side.
for the week ending 3/13/2020
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