U.S. markets and stock exchange traded funds continued their retreat Friday on intensifying fears over the potential economic damage from the coronavirus outbreak, with the number of known cases crossing over 100,000 around the world.
On Friday, the Invesco QQQ Trust (NASDAQ: QQQ) decreased 3.1%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) fell 2.2% and SPDR S&P 500 ETF (NYSEArca: SPY) dropped 2.8%.
The S&P 500 was on pace for its tenth session of losses over the past 12 days as the coronavirus disrupted global supply chains and triggered a more negative growth outlook for 2020, Reuters reports.
“It’s proving very difficult right now for market participants to look through another year of poor global growth and flat-to-negative earnings,” Peter Cecchini, chief market strategist at Cantor Fitzgerald, told Reuters.
Investors also brushed off updated data revealing a robust pace of hiring in February, and analysts argued the report does not reflect the current impact of the coronavirus.
“We don’t really know where the bottom is on this situation, but are very optimistic that this is not necessarily a long-term economic downturn,” Mark Doman, chief executive officer of Doman Group, told Reuters.
While the markets suffered through risk-off selling, investors switched over to safety plays, with long-dated U.S. Treasury yields slipping to record lows.
The Federal Reserve’s latest emergency interest rate cut by half a percentage point also failed to stem the bleeding. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, argued that the failure of the Fed’s rate cut to prop up the market indicates central banks are ill-equipped to handle the economic fallout of coronavirus, the Wall Street Journal reports.
“The Fed cutting rates by 25 or even 50 basis points doesn’t create a vaccine,” Sonders told the WSJ. “It doesn’t stop people from canceling their vacations.”
Investors are now hoping for the government to step in with fiscal stimulus to support an ailing economy, but President Donald Trump and White House officials have not indicated any intent on crafting a fiscal measure.
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