WASHINGTON – Thursday morning, not too long after a positive opening the latest coronavirus epidemic news / rumor hit Wall Street, promptly pancaking Mr Market yet again. The latest news (?): Word that the coronavirus epidemic has just taken another turn for the worse.
More on this weird market action in just a moment. But first…
Where did this column go for 10 days?
In case my millions of fans wonder where this column disappeared to from February 9 to just now, the answer is relatively simple. Along with my better half, I’ve just wrapped up the first really extended vacation I’ve taken in years. This time, we were off to the wilds of New Mexico.
After a delightful reunion with 3 of my oldest friends (plus spouses) at the delightful Chocolate Turtle B&B in Corrales – a near-suburb of Albuquerque – we headed off to explore the southeast portion of the state, which we’ve never visited, while our friends headed off home.
Poor connectivity means poor trading opportunities, but a better holiday
As we’ve learned over the past few years, US rural connectivity still leaves something to be desired. So, predictably, since connectivity proved iffy in the southeast portion of this wide-open, low-population desert state, we couldn’t always keep up with either news or market action.
Ditto for cellphone reception, which often vanished in the desert countryside. Fortunately, things were much better in sunny Las Cruces and in nearly-as-sunny Truth or Consequences. But by that time, we’d just decided to take a holiday from stocks, bonds and anti-Trump screeds for a few days.
So for the most part, for once in my life, I scarcely managed to cast a glance at Mr Market, who more or less did okay without my help. Just the usual bipolar gyrations we’ve lately come to expect in 2020, first due to the fake Trump impeachment sideshow, but now, more seriously, as a result of to-and-fro rumors pitching the latest (fake?) news about the Wuhan coronavirus epidemic.
Back to the Wuhan coronavirus epidemic and another selling panic
What to my wondering eyes did appear this morning was a nasty coronavirus story / rumor that popped up not long after a positive 9:30 a.m. warning bell on Wall Street. A series of links tell the story better than my jet-lagged brain probably can.
First, an early a.m. observation by Innovative Income Investors guru Tim McPartland.
“I look at the ticker after the market open today and see stocks off to another modest move higher–that’s all I need to see–I don’t watch minute by minute each day–maybe once per hour.
“The next hour I look and the DJIA is off 373 points, so I did turn on the TV to see what was going on–as typically happens all I find is folks speculating on what happened–no one really knows. 1 explanation I heard was that traders all of a sudden realized stocks were out of sync with interest rates and gold prices–well no kidding–this has been the case for a very long time.”
More chapters from Thursday’s scary (?) coronavirus news
Likewise, the collective minds at Briefing.com weighed in with a similar observation on the coronavirus epidemic.
“The stock market is trading in a flat and somewhat mixed fashion today. The lackluster showing is predominately a function of a prevailing thought that the stock market is overextended and due for a pullback.
“Worries about the coronavirus potentially becoming a bigger issue outside of China continue to lurk beneath the surface, as do worries that leadership stocks like Apple (AAPL 323.86, +0.24, +0.1%), Microsoft (MSFT 186.76, -0.51, -0.3%), Alphabet (GOOG 1526.65, -0.04, 0.0%), and Amazon.com (AMZN 2168.41, -1.81, -0.1%) have a lot of crowded long positioning and have run too far, too fast.
“There isn’t a lot of leadership today to speak of despite having received some otherwise good economic news in the form of the latest initial claims and Philadelphia Fed Index reports, both of which were better than expected and indicative of the relative strength the U.S. economy continues to enjoy versus other nations.”
Well, that was reassuring… Oh, wait!
No worries, right? Ooops. As we noted a bit earlier in this piece, Mr Market suddenly got pancaked, seemingly without a bit of warning. (Although those high-speed trading machines probably got the news first.) A somewhat mystified CNBC spread the good cheer.
“Stocks fell on Thursday, with most of the losses coming in a sudden, rapid move midday.
“Traders did not have an immediate reason for the decline other than possible technical factors and an increased risk-off sentiment stemming from fears of the coronavirus slowing the global economy. Gold jumped to a seven-year high.
“The Dow Jones Industrial Average was down 184 points, or about 0.6%. The 30-stock average went from trading down about 200 points to a session low of down 388 points in roughly two minutes before rebounding. The S&P 500 slid 0.6% and the Nasdaq Composite dropped 1%. Thursday’s moves come a day after the S&P 500 and Nasdaq hit record highs.”
More from China’s state-run news… Remind you of anyone here?
Via the CNBC link above:
“Some traders pointed to a report from the Chinese state-run Global Times, which said there had been a sharp increase in coronavirus cases. While the timing of the story did not match with Thursday’s move lower, it does tap into the market’s fears about the coronavirus weighing on the global economy.”
ZeroHedge weighs in
The reliably irascible ZeroHedge proceeded to provide a bit more color on the downside action.
“Update (1250ET): Less than an hour ago, we mentioned that Beijing’s heavy-handed virus-fighting measures had become the subject of an intense “public debate” about whether they were doing more harm than good.
“Well, according to an unconfirmed report from the Epoch Times’ Jennifer Zeng, party officials in Beijing are upgrading its “epidemic prevention” status to “Wuhan-level” – meaning a complete lockdown where residents aren’t allowed to leave their homes without specific permission.
“How much longer can the party keep this up before it damages public confidence to a degree that can’t be repaired[?]”
Answer: As long as they want to. The People’s Republic is a one-party, totalitarian Communist state – the kind the Bernie Bros want us to be. That means any dissent can result in instant termination. And not just from your job.
More bad news for stocks. And people, too…
But what really seemed to upset Mr Market – who’d recently been told the coronavirus epidemic showed signs of receding – was likely something like the following report, which ZeroHedge’s Twin Tylers partially excerpted from the AP. In this lengthy clip, we get to see the alleged worldwide coronavirus epidemic death toll thus far. Which is likely what got today’s stock market swan dive going in earnest.
Taking a stab at the worldwide death toll thus far
“According to the Associated Press, the latest figures provided by each government’s health authority as of Thursday in Beijing are:
- Mainland China: 2,118 deaths among 74,576 cases, mostly in the central province of Hubei
- Hong Kong: 65 cases, 2 deaths
- Macao: 10
- Japan: 727 cases, including 634 from a cruise ship docked in Yokohama, 3 deaths
- Singapore: 84
- South Korea: 51, 1 death
- Thailand: 35
- Taiwan: 24 cases, 1 death
- Malaysia: 22
- Vietnam: 16
- Germany: 16
- United States: 15 cases; separately, 1 U.S. citizen died in China
- Australia: 14
- France: 12 cases, 1 death
- United Kingdom: 9
- United Arab Emirates: 9
- Canada: 8
- Iran: 5 cases, 2 deaths
- Philippines: 3 cases, 1 death
- India: 3
- Italy: 3
- Russia: 2
- Spain: 2
- Belgium: 1
- Nepal: 1
- Sri Lanka: 1
- Sweden: 1
- Cambodia: 1
- Finland: 1
- Egypt: 1
ZH connects the death toll with stock market action (unedited)
“Today’s freak selloff, which peaked just as Europe closed at 1130am ET (suggesting a European fund may have been behind the violent move), saw a surge in activity, focusing primarily on those momentum names that had soared in recent weeks on a flurry of call buying such as Tesla, Virgin Galactic, Plug Power, and the FAAMGs of course. And while it is still unclear what triggered the selling, we do know that once the avalanche started, it was straight down, as the NYSE Tick index dropped as low as -968 just as Europe closed, meaning almost 1000 more stocks traded on a downtick than an uptick amid the burst in market sell orders. “
Yep. It’s another selling panic. Beware of putting in “market” sell orders.
In other words, a selling panic got started near the Euromarkets’ close and quickly spread to Wall Street. Of particular importance: The majority of “sell” orders appear to have been market orders, something we’ve often cautioned against in this column. What a “market” order means is simply this. You put in your buy or sell order “at the market.” In other words, you’ll buy or sell X shares of stock at whatever the price is once your broker gets your market order. Which, for do-it-yourselfers generally means a couple of seconds or les.
That’s okay if you’re not particular. But if you’re dumping shares in a selling panic like we’ve seen today, the next order could be a few cents, a few dollars, or tens of dollars below what you thought you’d get, because in a market order, you don’t specify your price. So you get what’s going. And in a panic situation, you could get hosed. (Likewise, in a buying panic.)
Headlines still drive this market. Irrationally.
Anyhow, it’s useless to guess where Mr Market is headed next, so I’ll sign off for now and do some after-hours research. But today’s action continues to buttress my thesis that, while fundamental analysis and trading charts can give us a general clue as to where stocks are headed, on a macro basis, today’s markets are almost totally driven by headlines, false or otherwise.
And, given that the coronavirus headlines are still dominated by the obvious epidemic currently plaguing the Chi-coms and their hapless constituents, we can never really know whether the coronavirus news we’re getting is real or fake. Which is a bad situation indeed for anyone invested in stocks.
UPDATE:As we post this article, just after 3 p.m. ET, the Dow remains in negative territory, off 172 points, more or less (-0.57%). The S&P 500 is off 17.76 points for a loss of -0.58%. And the tech-heavy NASDAQ is, once again, getting the worst of things due to its China-centric supply chain. The NAZZ is currently down approximately 95 point for a loss on the day of nearly 1%. Closing prices? Who knows? Most likely down. Depending on the latest news on the coronavirus epidemic.
See you tomorrow.
– Headline image: February 2, 2020 street photo in Guangzhou city. Flicker photo by Zhizhou Deng.
Via Wikipedia entry on Coronavirus epidemic, CC 2.0 generic license.