Day Traders Diary

3/11/20

The coronavirus-induced sell-off reached a new low on Wednesday due to uncertainty around a fiscal response to curb slower economic growth resulting from the outbreak.

The Dow Jones Industrial Average tumbled 1,464 points, or 5.9%, to close at 23,553. The 30-stock average closed in a bear market, down more than 20% below the record close set only last month and putting to end an expansion that started in 2009 amid the financial crisis.

The S&P 500 ended the day 4.9% lower at 2,741 just short of a bear market. The Nasdaq Composite fell 4.7% to 7,952 about 19% below its all-time high. A 20% decline is considered a bear market on Wall Street.

Losses intensified on Wednesday after the World Health Organization declared the outbreak an official global pandemic. The number of coronavirus cases around the world totaled more than 100,000, according to data from Johns Hopkins University. In the U.S. alone, more than 1,000 cases have been confirmed. This increase in cases added to fears of a global economic slowdown and have increased calls for government intervention.

President Donald Trump suggested Tuesday a 0% payroll tax rate that could last until the end of the year. However, the timing of such policies being implemented remains uncertain. Sen. Chuck Grassley, who heads the Senate Finance Committee, said such a tax cut needed to be examined.

The uncertainty around fiscal stimulus, coupled with a reduction in travel demand and rising coronavirus cases, pressured airline and cruise line stocks. American, Delta, United and JetBlue all fell at least 4.3%. Norwegian Cruise Line and Carnival fell 26.7% and 9.5%, respectively.

Bank shares also fell broadly. Bank of America and JPMorgan Chase fell 4% and 4.7%, respectively. Citigroup lost 8.6% while Morgan Stanley and Goldman Sachs both dropped more than 6.5%.

Interestingly, U.S. Treasuries didn't exhibit the flight-to-safety one would expect during an exodus from stocks.

The 2-yr yield increased three basis points to 0.50%, and the 10-yr yield increased seven basis points to 0.82%. The U.S. Dollar Index increased 0.1% to 0.82%. WTI crude fell 3.7%, or $1.25, to $33.00/bbl.