The Lockdowns Are Back

By Alex Eule |  Monday, March 14 Covid Reminder. The days of Covid lockdowns have largely been forgotten in the U.S. Even as the Omicron wave caused record case counts earlier this year, U.S. investors looked beyond the headlines. There was little political appetite -- and decreased scientific support  -- for new shutdowns, which meant Covid was no longer a material market risk.  For nearly two years, though, it's been the tale of two pandemics. As cases surged in the U.S. and Europe, China's "Zero-Covid" approach seemed to work. Covid waves in the West continued to crest, while China's numbers were virtually flat. Chinese factories kept going, one bright spot amid the global supply chain's problems.  But on Sunday, China reported 1,800 new cases of symptomatic Covid, its highest daily total in two years. The country put Shenzhen and its nearly 18 million residents under a new lockdown that will last at least a week. Shenzhen is home to key manufacturing facilities, including Apple iPhone assembler Foxconn. Shanghai is also dealing with new lockdowns.  Traffic congestion in Chinese cities has fallen sharply in recent days and is back to levels similar to March of 2020, Tanner Brown reports for Barron's.  It's a troubling sign for a global economy hoping to move beyond the pandemic. And it's bad news for a still reeling global supply chain, according to Patrick Moorhead, founder and chief analyst at Moor Insights & Strategy:  It only takes one missing link in the supply chain to hold up the shipment of an end product. If there’s any new Covid challenges out of Shenzhen this will result in global challenges in manufacturing and supplying end products. The Shanghai Composite index fell 2.6% on Covid worries. (More on China below.)  In the U.S., Apple could be one of the companies most affected by a protracted shutdown in China. Its stock fell 2.7% on Monday, though that was a fairly unremarkable drop on a bad day for tech stocks. The Nasdaq Composite fell 2% on the day, to its lowest closing value since late 2020. The tech-heavy index is down 22% since its November peak.  Elsewhere in the U.S., shares of Covid vaccine maker Moderna rose 8.6%, a signal that investors are beginning to worry about the virus again. Heading into today's trading, Moderna shares were down 46% this year. "News in recent days, however, could restore investor confidence that the market for the Covid-19 vaccines won’t be fading quickly," writes Barron's healthcare reporter Josh Nathan-Kazis The S&P 500 slipped 0.7% after beginning the day in positive territory on hopes for a diplomatic solution to the war. Any optimism about an end to the tragedy in Ukraine has come and gone in previous weeks, so it's hard to know if this time will be different.  One change from the first days of the war, though, is that oil prices are now falling. That's possibly on hopes of a resolution, but more likely because China shutdowns are threatening the global demand for energy. Crude fell 5.8% on the day, to $103.01 a barrel. It's down 17% since March 8.  Meanwhile, bond yields continue to head higher, as the Federal Open Market Committee gets set to hold its policy meeting over the next two days. Investors are all but assured of a quarter-point rate increase when the Fed wraps up the meeting on Wednesday. The yield on the 10-year Treasury note was up 14 basis points on the day, to 2.139%, its highest level since June 11, 2019 -- a full six months before anyone had even heard of Covid.

 

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