The Tuesday Market Minute
- Global stocks steady after Wall Street historic sell-off Monday, but nerves are frayed in a market that's lost more than $16 trillion since the late February peak.
- Coronavirus infections rise to 182,000 worldwide, with 7,100 deaths, since it was first identified in early January.
- President Trump says economic disruption could last until August as U.S. cases near 5,000 and cities around the country enact significant restrictions to daily life.
- Trump Tweets government will be "powerfully supporting" industry, but investors question government's fiscal ambition.
- Goldman Sachs sees China economy contracting by 9% over Q1 thanks to economic costs of coronavirus shutdown.
- The CBOE's VIX volatility index holds near record highs after Monday's surge, ensuring another wild ride on Wall Street as stocks trade near three-year lows.
- U.S. equity futures pare earlier gains, but still point to modest opening bell advances ahead of February retail sales data at 8:30 am Eastern time and Q4 earnings from FedEx after the close of trading.
U.S. equity futures bumped higher Tuesday, following the biggest Wall Street rout in more than three decades. as investors continue to grapple with record high volatility, an unpredictable coronavirus infection rate and the likelihood the the global pandemic gives way to a U.S. recession.
Yesterday's historic sell-off, however, which loped nearly $3 billion in equity value from the S&P 500 and set U.S. stocks back to levels last seen nearly three years ago, still hovers over Wall Street heading into the open, with investors now re-setting their expectations for when the economic impact of the coronavirus pandemic will ultimate dissipate.
President Donald Trump's suggestion yesterday that it may be "August, it could be July, could be longer than that" quickly triggered concerns for a U.S. recession, with contraction likely in both the second and third quarters of this year, sending markets into their late-afternoon tailspin.
A late Monday Tweet, suggesting the U.S. government would "powerfully" support industry sent U.S. futures into "limit up" levels, but that rally quickly faded when little detail from officials followed the President's missive.
Nerves were moderately more steady in overnight trading, however, and with flat markets in Asia and a modest rebound in Europe, Wall Street looks to claw back some of Black Monday's significant declines in the opening hours of trading.
A second wind, however, supported U.S. stocks in the form of reports from Politico and the Washington Post that Treasury Secretary Steve Mnuchin will ask Congress for $850 billion to tackle the economic impact of the coronavirus pandemic.
Contracts tied to the Dow Jones Industrial Average suggest a 510 point opening bell gain for the 30-stock index, which plunged nearly 3,000 points yesterday to its lowest level since April 2017.
Futures tied to the S&P 500, meanwhile, suggest a 67point comeback for the broadest U.S. benchmark, which has fallen some 27% from its February 19 peak, losing nearly $8.3 billion in equity value in just eighteen days.
Market volatility, however, remains at eye-watering levels, with the CBOE's VIX volatility gauge holding at 81.33 points, just south of yesterday's all-time high of 82.69 points. The level effectively means options traders see an 81% chance that the S&P 500 will fall -- or rise -- by 81% over the next twelve months.
The extreme levels of market volatility were evident in early European trading, which saw the Stoxx 600 rise by 2.6% in the open minutes of trading, only to fall to a 1.4% decline by mid-day trading, with red in market from Frankfurt to London.
Oil markets were also paring gains in early European trading, with Brent crude sliding below the $30 per barrel mark after a report from Goldman Sachs suggested China GDP could contract by as much as 9% over the first quarter of this year as part of the economic cost of combating the spread of the coronavirus, a move which would have huge implications for oil demand within the world's biggest energy importer.
Brent crude futures contracts for May delivery, the global benchmark, were last seen 59 cents lower from their Monday close in New York and trading at $29.47 per barrel, while WTI contracts for April delivery were marked 20 cents lower at $28.50 per barrel.
Overnight in Asia, Wall Street's sell-off gave way to cautious optimism in regional markets, with investors now looking to individual governments for targeted stimulus to support beaten-down industries and the broader economy.
The region-wide MSCI ex-Japan index was essentially flat on the session, while Japan's Nikkei 225 ground out a modest 0.06%session gain as the yen eased to 106.68 against the U.S. dollar.