U.S. stocks finished lower Friday, but after a volatile session that saw the Dow recover about half of the day’s losses and even notch a gain for the week as investors watched cases of COVID-19 climb above 100,000 globally while and oil prices tumbled by the most in five years.
The potential for the spread of the coronavirus world-wide to disrupt economic activity has placed pressure on safe-haven asset prices, notably driving the U.S. Treasury 10-year bond yield to a new record low below 0.8% and gold prices saw the biggest weekly gain since 2016.
How did major benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.14% settled 256.50 points lower, or 1%, to 25,864.78, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.24% lost 51.57 points, or 1.7%, to close at 2,972.37. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.13% finished 162.98 points lower, or 1.9%, at 8,575.62.
On Thursday, the Dow closed at 26,121.28, down 969.58 points, or 3.6%, while the S&P 500 lost 106.18 points, 3.4%, to close at 3,023.94. The Nasdaq fell 279.49 points, 3.1%, to close at 8,738.60.
What drove the market?
Stocks ended a volatile week with further losses as the spread of the viral outbreak that was first identified in Wuhan, China cast a shadow over economic activity, accelerating purchases of assets perceived as safe havens and placing additional pressure on those considered risky like stocks.
Adding to market woes, oil futures plunged 10% on Friday after talks between the Organization of the Petroleum Exporting Countries and their allies collapsed, with Russia refusing to agree to a Saudi-led plan for additional crude production cuts.
“There is an element to this that’s like dynamite fishing,” said Hans Olsen, chief investment officer at Fiduciary Trust Company, about the shocks to stocks and other financial assets from U.S. spread of the coronavirus. “The boom happened last week. Now we have to wait for the casualties to emerge,” he said of potential distress for investment funds due to the volatility in financial assets.
The ongoing equities selloff overshadowed a better-than-expected jobs numbers from the Labor Department, which reported that the U.S. created 273,000 new jobs in February. However, the data was compiled before the coronavirus contagion spread world-wide. Economists polled by MarketWatch had forecast a 165,000 increase.
“The US [jobs] number was decent but it failed to tame the turmoil in the equity markets and investors are not even remotely interested in riskier assets,” wrote Naeem Aslam, chief market analyst at AvaTrade in a note after the nonfarm payrolls report.
The unemployment rate fell a notch to 3.5% and matched a 50-year low, with average wages paid rising 9 cents, or 0.3%, to $28.52 an hour.
Optimistic market participants, however, say, one positive takeaway from the jobs report is that it reflects that the domestic economy stands on a solid footing as it braces for the impact the infectious disease might bring. “Given the strength of the data though, the economy appears to have enough positive momentum to slow for a time without significant risk of tipping into recession,” wrote Jim Baird, chief investment officer for Plante Moran Financial Advisor, in a Friday research report.
However, “the COVID-19 infection rate is multiplying and more states in the U.S. are imposing emergency orders,” wrote Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities, in a Friday note.