Stock Losses Accelerate as Manufacturing Data Beats Estimates

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Stock losses worsened by midday Wednesday, as better-than-expected, but somewhat misleading , manufacturing data rolled in. 

All three major U.S. indices continued their morning losses into the afternoon, with the S&P 500 down as much as 4.3% and the Dow Jones Industrial Average down as much as 4.1%. These losses were capped at no more than 3.8% in the morning. 

The 10 year treasury yield fell to as low as 0.59%. Not only is the Federal Reserve supporting treasury prices to keep interest rates low, but the magnitude of the drop — from 0.68% Monday, suggests risk-averse investors are rushing for safety. 

Unsurprisingly, JPMorgan  (JPM) - Get Report and Goldman Sachs  (GS) - Get Report were down 6.2% and 4.7%, respectively, on the prospect of the one-two punch of lower loan volumes and slimmer net interest margins. 

In the morning, the White House reported a bleak outlook on projected deaths from the Coronavirus for 2020. Plus, the ADP jobs report showed a contraction year-over-year, which economists and investors alike are quick to note may be somewhat misleading; the number will get worse when it encapsulates more time that the economy has been impacted by the virus. 

Later, the Institute for Supply Chain Management published its manufacturing data, which showed a reading of 49. Anything below 50 is a contraction year-over-year. The number beat estimates of 44. But this, too, is bound to get worse for the next reading. 

Caterpillar  (CAT) - Get Report shares were hit, losing as much as 4.4%. 

“This March reading is largely based on January and February data points and therefore reflects the pre-COVID-19 trend,” wrote Morgan Stanley industrials analyst Courtney Yakavonis. 

She wrote in a note Tuesday that, while the average analyst predicts a 29% decline in earnings per share for Caterpillar in 2020, the decline could be close to 40%, as manufacturing and demand headwinds in all major continents dent the company’s sales and profits. 

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