Day Traders Diary

2/25/20

The market rout continued for a second day on fears of the coronavirus spreading globally. After opening higher, the Dow dropped 879 points, or 3.1%, to 27,081. The Dow posted back-to-back losses of at least 800 points for the first time ever. The S&P 500 slid 3% to 3,128 posting back-to-back declines of 3%. The S&P 500 has lost $1.7 trillion in market value in the last two days The Nasdaq Composite fell 2.8% to 8,965, turning negative for the year.

After today, the Dow and S&P 500 are 8% below their record highs reached earlier this month. The Nasdaq closed 8.9% below its all-time high from Feb. 19. Technology stocks such Apple and Facebook have fallen into correction territory, down more than 10% from all-time highs hit just last month.

U.S. equities dropped as Centers for Disease Control and Prevention (CDC) officials briefed the U.S. on how to get ready if the coronavirus outbreak worsens domestically. Stocks fell even as top White House economic advisor Larry Kudlow maintained that the coronavirus was contained so far in the U.S. and that economic growth had yet to be significantly affected. Fed Vice Chair Clarida provided a pragmatic view, reiterating that it's still too early to assess the growth impact from the coronavirus, or whether it will lead to a material change in its outlook, but the market didn't care for pragmatism, either.

All 11 S&P 500 sectors finished with steep losses ranging from 1.8% (consumer staples) to 4.3% (energy). Investors decided to sell first and ask questions later as they listened to updates from several organizations and companies.

Traders were unnerved by the bond market, which pointed to slower economic growth around the world. The 10-year Treasury yield traded at 1.33%, hitting an all-time low. The 30-year U.S. bond yield also reached a record low. Bond prices move inversely to yields.

The drop in yields pushed bank stocks lower. Bank of America fell more than 5% while JPMorgan Chase closed 4.5% lower. Citigroup and Wells Fargo declined by 4.3% and 2.7%, respectively. Lower rates could hit bank profit margins.