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US open: Stocks continue to fall as nightmare week continues

By Iain Gilbert

Date: Friday 28 Feb 2020

US open: Stocks continue to fall as nightmare week continues

(Sharecast News) - US stocks opened sharply lower on Friday, putting both the Dow and S&P 500 well and truly on pace for their worst weekly performance since the Global Financial Crisis in 2008.

As of 1530 GMT, the Dow Jones Industrial Average was down 3.48% at 24,870.89, while the S&P 500 was 3.21% softer at 2,883.18 and the Nasdaq Composite came out the gate 2.49% weaker at 8,352.95.

The Dow opened 895.75 points lower on Friday, after recording its biggest one-day decline in history in the previous session as major indices dipped into correction territory while the Wuhan coronavirus continued to spread and some more big names warned on guidance.

The benchmark US 10-year Treasury yield was at a fresh record low of 1.176% at the open as concerns about the coronavirus and its impact on the global economy continued to weigh on investor sentiment.

As far as the virus was concerned, New Zealand and Nigeria both reported their first cases overnight, while South Korea confirmed more than 500 new cases and China reported 327 more.

The outbreak has also raised questions regarding potential intervention from the Federal Reserve, with former governor Kevin Warsh telling CNBC that he anticipates global monetary policymakers will soon take action in response to spread of COVID-19.

However, St Louis Fed President James Bullard stated rate cuts would only be a possibility if the outbreak turned into a full-blown pandemic.

Chatham Financial's associate director Andy Scott said: "Volatility has certainly returned to financial markets as virus worries continue to intensify, highlighting the dangers that lurk when volatility indicators fall to record lows.

"The volatility index or the fear gauge, as it is often referred to, was bumping along at its lowest levels for the past couple of years and even as recently as last month. This week it has reached its highest level in the past two years, highlighting that it is often when the market is least expecting something of global significance to happen, everyone will suddenly wake up and start to sell."

On the macro front, America's shortfall in trade on goods with the rest of the world narrowed unexpectedly at the turn of the year, as imports fell more quickly than exports.

According to the Department of Commerce, in seasonally adjusted terms, the foreign trade deficit on goods shrank from an upwardly revised -$68.7bn in December to -$65.5bn for January, for a month-on-month decline of 4.6%.

Elsewhere, Americans' spending on consumption was a tad lower than expected at the start of 2020 despite a jump in personal earnings.

According to the Department of Commerce, personal incomes and spending increased at a month-on-month pace of 0.6% and 0.2%, respectively. Economists had anticipated increases of 0.3% for both.

Still on data, the slowdown in manufacturing sector activity in the Chicago area eased by much more than expected in February, the results of a closely-followed survey showed, despite signs that the coronavirus was lengthening delivery times substantially.

Market News International's factory sector gauge jumped from a reading of 49.2 in January to 49.0 for this month - comfortably ahead of a consensus projection of 46.3 for the headline index.

Lastly, US consumer sentiment remained heightened during the second half of February despite the coronavirus's spread and associated fears.

The University of Michigan's final sentiment index for February was broadly flat at 101 from an initial reading of 100.9. The gauge of current conditions increased from the prior month to 114.8 and the expectations index rose to 92.1.

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