Day Traders Diary

2/28/20

The major averages tumbled once again but closed well off the lows as the spread of the coronavirus remains front and center. The Dow Jones Industrial Average dropped 350 points, or more than 1%. The 30-stock Dow briefly fell more than 1,000 points. The S&P 500 slid 0.8% while the Nasdaq Composite closed up 89 cents for is second up day of the week. The Dow and S&P 500 closed lower each day this week.

The Dow fell more than 12% — its biggest weekly percentage loss since 2008. On a points basis, the Dow fell more than 3,500 points. It also ended the week in correction territory, down 14.1% from a record high set Feb. 12. The S&P 500 lost 11.5% week to date in its worst weekly performance since the crisis. The Nasdaq lost 10.5% this week and was nearly 13% below a record high.

A pledge by the Federal Reserve late Friday eased the market's pain slightly into the close. Fed Chairman Jerome Powell said in a statement the central bank will "act as appropriate" to support the economy amid the coronavirus outbreak.

Eight out of eleven sectors ended the day in negative territory with losses ranging from 0.8% (consumer discretionary) to 3.3% (utilities). Interestingly, the utilities sector was the day's weakest performer, suggesting a strong desire to raise cash. That is also the likely reason behind a sharp drop in prices of metals. Gold fell 4.5% while palladium got decimated after surging 45.9% for Q1 going into today.

In the bond market, the 10-yr yield fell another 17 basis points to a fresh record low of 1.13% while the 30-yr yield slid 11 basis points to 1.67%. Up front, the 2-yr yield fell 22 basis points to 0.88%. Thanks to these moves, the day ended with the fed funds futures market pointing to a 96.0% implied likelihood of a 50-basis point rate cut in March, followed by a 74.0% implied probability of another 25-basis point rate cut in April.