Stocks plummeted Thursday as President Trump wielded more tariffs on Chinese goods coming into the U.S. Stocks, according to many recently, are highly vulnerable to risk and investors are moving into safety.
All three major U.S. indices fell Friday, with the S&P 500 down as much as 2%. The 10 year treasury yield slipped to 0.62% from 0.64% on a risk-off day Friday.
While few details have yet to emerge, President Trump threatened more tariffs on China as a result of its handling of the Coronanvirus outbreak. Many companies, largely debt-laden ones, are struggling to whether the storm posed by the virus. Tariffs on products would be disastrous.
Underperforms Friday included banks, consumer discretionary and industrials, all cyclical sectors.
The $1 trillion Amazon (AMZN) fell 5.7% after the tech giant beat revenue expectations for the first quarter, but missed cloud revenue estimates and missed profit estimates. The company said it’s in heavy investment mode and may operate at a loss for the second quarter, forcing investors to rethink near-term profit estimates, even as the consumer shift into e-commerce, especially for groceries and essentials, accelerates.
The broader market has been sensitive, trading at stretched valuations, against the risks that lockdown eases won’t go smoothly and that a second infection wave of the virus could emerge. Now, the tariffs are potentially an added risk factor.
And investors have continued piling into cash, which they’ve done since early February. But this past week, global investors put $91 billion into cash, more than the $10.6 billion into bonds, according to Bank of America Global Research. Treasury prices have already soared as part of a liquidity-driven up move since late March, forcing investors to choose cash for their move into safety. Now, global investors hold about $4.7 in cash.
This indicates not only that stocks have fallen in the past few days, but that investors are bracing for more pain. Bank of America sees an “extreme bearish" signal from global stock investors.