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The selling in the stock market is going to persist at today's open and it will be aggressive. The futures are limit-down with a 5% decline. Separately, the SPDR S&P 500 ETF Trust (SPY) is trading 6.8% lower in pre-market action.
As a reminder, the first circuit breaker is enacted when the S&P 500 declines 7%, which then leads to a halt in trading for 15 minutes.
Once again, the negative bias is wrapped up in worries about the spread of the coronavirus, which have hit home (and close to home in certain instances) with the NBA suspending its season, the NCAA planning to hold its basketball tournaments without fans, Italy closing all shops, except grocery stores and pharmacies, and the president last night announcing a 30-day ban on travel from 26 European countries, starting at midnight on Friday.
President Trump's Oval Office address regarding the coronavirus has been a hot topic of conversation this morning, with critics saying it came up short of expectations in terms of a fiscal stimulus plan and short of expectations in boosting consumer confidence.
Those criticisms may be subject to debate, yet the market itself was a tell as the futures rolled over as the president was speaking and continued to decline after he concluded his speech.
Not surprisingly, travel-related stocks are down sharply in pre-market action, as the travel ban makes a bad revenue and earnings situation even worse.
The crux of the matter, though, is that all of the efforts being made to curtail the spread of the coronavirus are going to produce negative economic outcomes that will weigh far and wide on earnings prospects since they are also curtailing consumer and business spending.
What's more is that investors don't have a handle on how long this situation will persist, so there is a sell-first-ask-questions later approach that is driving the material decline in stock prices.
Today has the potential to be a "panicky" day of selling, which is good and bad. The bad will be in the magnitude of the losses. The good could be in a budding awareness that panicky selling after large losses already is often the pathway to a near-term bottom that leads to a snapback rally.
There is a lot of smoke right now, though, that makes it challenging to assess any trading situation, so all one can be certain of is that volatility is going to remain high and price swings will remain wide.
Speaking of price swings, the Producer Price Index for February declined 0.6% m/m (Briefing.com consensus -0.2%) while core PPI, which excludes food and energy, declined 0.3% (Briefing.com consensus 0.1%). That left the yr/yr readings at 1.3% and 1.4%, respectively.
Initial jobless claims, meanwhile, decreased by 4,000 for the week ending March 7 to 211,000 (Briefing.com consensus 218,000). Continuing claims for the week ending February 29 decreased by 11,000 to 1.722 million.
This report will be bypassed for the most part, though, as subsequent developments suggest there will be a tide of rising initial claims in coming weeks.
Elsewhere, the ECB voted to leave its key policy rates unchanged, as expected, and opted instead to provide policy accommodation by announcing additional net asset purchases of EUR 120 billion until the end of the year, offering liquidity support with additional longer-term refinancing operations, and lowering rates for banks to foster increased lending to small and medium-sized businesses.
