All three major U.S. indexes were down, with the S&P 500 and Dow Jones Industrial Average both down more than 3%.
This came after a strong Thursday and still a 13% gain in the past 8 days. Investors have been encouraged that monetary and fiscal stimulus is holding over less liquid businesses, households and corporations for the time being, while revenues and incomes seemingly vanish. Jobless claims for the past week were 3.2 million, a record. And some had been pointing out that the slowing rate of Coronavirus infection in Italy could be a precursor to the U.S. spread rate, which lags Italy’s by a few weeks.
But Friday’s market was clearly risk-off. The 10 year treasury yield, slipped to 0.75%, as investors bought the bond. The yield has been range-bound and pressured of late, with the Fed buying treasuries aggressively to keep interest rates low, but the down move Friday was a slightly aggressive one. For the past week, the yield had sat at just above 0.8%
While market participants and analyst had recently grown slightly more optimistic on the U.S. economy, which is likely heading into recession, risks clearly remain.
"Policy measures should be sufficient to offset most of the virus containment measures so far,” wrote Lauren Goodwin, Economist and multi-asset portfolio strategist at New York Life Investments in emailed remarks to reporters. "If the virus proves to be more harmful than most anticipate, then markets could experience significant downside.”
Goodwin noted that the rally of the last two days had been the largest two-day up move since October 2008. That rally came as investors were relieved by government stimulus efforts to stop the bleeding in the banking system that ultimately triggered the Great Recession. But the U.S. market then fell 33% to its March 2009 bottom.
"Now, as then, investors are still working to assess the overall impact of policy measures compared to the total impact of the virus,” said Goodwin. "Since we won’t know the full scope of the virus until people get safely back to work, we can’t confidently say that even this grand size and scale of policy measures eliminate market downside risk."
Catch up on the Latest Videos on TheStreet!