Bottomless

By Nicholas Jasinski |  Thursday, February 27

Bottomless. U.S. stock indexes have fallen from all-time highs to correction territory in record time. It has taken just six trading days for the S&P 500 and Nasdaq Composite to tumble more than 10% since notching record closes last Wednesday, Feb. 19. The Dow Jones Industrial Average likewise entered a correction today, but its last all-time high close came a week earlier, on Feb. 12.

Not surprisingly, the cause of today’s wipeout was continued investor panic over the spreading novel coronavirus.  The market selloff reaccelerated on Thursday, as the dribs and drabs of information from health officials around the world kept Wall Street on edge. There's a lot to digest, and none of it sounds good this week.

Case counts rose in Italy, South Korea, Iran, and elsewhere. Japanese authorities are closing schools nationwide. And in the U.S., the Centers for Disease Control and Prevention reported the first possible case of “community transmission” in California late Wednesday—meaning a person tested positive for the infection, Covid-19, who hadn’t traveled to areas where the virus was active, and hadn’t been in close contact with anyone who had either.

There was nowhere to hide in today's trading. All 11 sectors of the S&P 500 fell at least 3.4%, led lower by real estate’s 5.7% plummet, as technology and energy each dove 5.4%. The index as a whole closed down 4.4%. Twenty-nine of the Dow’s 30 components closed in the red, while the group lost 1,190.95 points, or 4.4%—its biggest one-day point drop in history. The tech-heavy Nasdaq plunged 4.6% today.

The price of oil, meanwhile, dropped another 3.4%, and the VIX volatility index spiked 40%. Treasury yields continued to collapse to record lows as investors piled into the safe-haven asset. There's simply no appetite for risk in the market right now.

Any why should there be? Investors aren’t epidemiologists or experts on communicable diseases—even if they may talk like it. No one really knows how the global Covid-19 outbreak will shake out before it’s over, or how deep the negative economic impact will be. Sell now and figure it out later seems to be the mantra.

Unless you’re a bargain hunter. The speed at which the market has sold off over the past week has made numerous fundamental and technical indicators suddenly appear mighty attractive, across a range of stocks and sectors. And that’s leading some investment strategists to say it’s time to buy.