Friday, February 28, 2020

US stock markets continue to plunge over coronavirus uncertainty

The Dow Jones Industrial Average plummeted more than 350 points during a volatile trading day on Friday, as financial markets continue to dive on uncertainty over the spread of the novel coronavirus.

The Dow suffered its worst week since the financial crash of 2008.

The Dow was down by 1.37% at closing. The S&P 500 and Nasdaq experienced similar volatility Friday, with steep drops during mid-morning trading. The S&P 500 closed down just 0.82% and the Nasdaq closed up by 0.01%.

Overall, the Dow has lost more than 3,500 points this week, or more than 12%.

As markets plunged, Federal Reserve Chair Jerome Powell issued a rare statement Friday, saying they was "closely monitoring" the situation and "will use our tools and act as appropriate" if needed.

"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity," Powell said. "The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."

Prior to Powell's statement, the Dow was briefly down by more than 900 points during intraday trading Friday.

Experts and analysts emphasize it is the uncertainty about the outbreak and its full financial impact that is driving the market volatility.

"Ultimately, it is the uncertainty that is most difficult to price in, so people are selling in the advance of concrete information," Chris Zaccarelli, the chief investment officer for Independent Advisor Alliance said Friday.

"Based on what we know now, it remains our belief that the impact to the economy will be severe, but not enough to create a recession," he added.

Mark Hamrick, the senior economic analyst at Bankrate, noted that for long-term investors, "This jolt is a bump in the road that will eventually only be a memory."

"As with the outbreak, we cannot be confident of the depth or duration of the market’s decline or the economic impacts in the short-term," he added in a note Friday. "But also similar to the spread of the virus, we know that it will have a conclusion. It will take some time to arrive at that point."

Hamrick added that, "long-term investors with the ability and fortitude to remain in the market should do just that."

"This is for certain: One locks in a loss by selling," he said.

The plunge comes as the U.S. Food and Drug Administration announced it's been alerted to the first manufacturing shortage of a drug due to a viral coronavirus outbreak that began in China and has now reached American soil.

Officials also warned Americans earlier this week to prepare for community spread of coronavirus in the U.S., and companies have warned investors of supply chain issues related to the outbreak.

Among the worst performers Friday were the Boeing Company, J.P. Morgan Chase and the Travelers Companies, which fell by 4.4%, 4.3% and 3.4%, respectively.

The best performers were Exxon Mobil, Microsoft and Dow Inc, which gained by 3.25%, 2.42% and 2.17%, respectively.

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