Calm before the storm – US Stock market

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Storm

On Thursday, the US Stock market seemed to be performing silently without any major changes in the first half of the day. The calmness at Wall Street did paint a picture of the upcoming storm in the market coming shortly. Assumptions turned into reality at around midday when the stocks sold off sharply and the investors seemed to scramble. While there was no major catalyst that brought about this change, it is only the coronavirus worries that must have led to this state of the market all of a sudden.

DOW was at its lowest when the day came to a close with a drop of around 388 points and every other major indices were struggling with red color till day end. On the other hand, the treasury bond yields also faced a dip as it moves opposite to prices. The shift in the treasury bond yields showcases the fact that investors are hungry for haven at this moment which is the reason for its such high demands.

Such sell-off spree only lasted for a while though and post which the market had a swift rebound. However, even with the rebound, each of the major indices did end up with red color on them. The DOW ended 128points or 0.4% lower while the S&P 500 (SPX) finished the day with 0.4%. Speaking about the tech-heavy index, the Nasdaq Composite Index finished the day with a 0.7% drop.

The ultimate fear factor

Recently, the investors were confident that the coronavirus outbreak has been slowed down. However, claims of coronavirus cases from South Korea on Thursday reinstated the fact that the flu-like virus spread is far from being contained as of yet. The new cases do stress on the fact that the global supply chain will now start to get affected materially. This can be seen in price action at the DOW index where shares of AMD (Advanced Micro Devices) have taken a steep drop by 3%.

The declaration from Apple (AAPL) that they won’t be able to meet its quarterly sales target earlier this week did stir uncertainties in the market.

Officials claim that the domestic economy of China is still stable and the US tech giants can deal with this situation smoothly. There are also reports of companies shifting their manufacturing units to different parts of the world so that the supply chain economy doesn’t get impacted anymore. Federal Reserve is expected to offer another rate cut which shall help companies carry more debt and stabilize the finances in this period.

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