• Market Crumbs

Panic Grips Wall Street As Stocks Sit Less Than 5% From All-time Highs

Image via Jp Valery on Unsplash

Amidst the latest news about coronavirus' spread and its potential effects on the global economy, the stock market saw a sea of red yesterday. All three major U.S. indices fell more than 3%, with the Dow Jones Industrial Average and S&P 500 having their worst day in two years, wiping out their gains for the year. 

The Dow fell 1,031 points yesterday, marking its third-largest point loss in history. Investors rushed to safe haven assets such as gold and U.S. treasuries. Gold jumped to just shy of $1,700 per ounce to hit a fresh seven-year high. Yields on U.S. treasuries, which are inversely related to price, tanked with the yield on the 10-year Treasury note hitting a three-year low of 1.3563%, while the 30-year Treasury bond hit a record low of 1.8142%.

The selloff conveniently caused various brokers to have "technical difficulties." "Some clients are experiencing technical issues and we are working as quickly as possible to resolve," Fidelity said. TD Ameritrade reported "some slowness in the reporting of trade confirmations this morning related to heavy trade volumes at the open." Schwab had issues as well, saying "Due to higher-than-usual volumes, some clients may have experienced delays in accessing some online features as the market opened but our systems are fine and up and running."

Despite sitting less than 5% from all-time highs, the sell-off that began last week has already caused traders to price in a higher probability the Federal Reserve may try to save the day with a rate cut. Fed funds futures markets now predict a 14% probability of a rate cut at the March meeting and an 80% probability the Fed eases during its July meeting.

Former Minneapolis Fed President Narayana Kocherlakota even wrote an opinion piece for Bloomberg saying "I don’t think that the FOMC should wait that long to deal with this clear and pressing danger. I would urge an immediate cut of at least 25 basis points and arguably 50 basis points."

With the market selling off, familiar faces tried to downplay everything from the coronavirus to the phase one trade deal.

U.S. President Donald Trump tweeted "The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!"

U.S. Treasury Secretary Steven Mnuchin said of the coronavirus "I don’t expect that this will have any ramifications on Phase 1. Based on everything that we know, and where the virus is now, I don’t expect that it’s going to be material."

Warren Buffett came on CNBC to calm investors, saying coronavirus "is scary stuff" but "I don’t think it should affect what you do in stocks." Buffett added "If you look at the present situation, you get more for your money in stocks than bonds."

As Market Crumbs wrote last week, it's becoming easier for retail investors to invest. Retail investors have piled into the most overvalued stocks as of late with many now already well underwater. The good news for those who are looking for the stock market to bounce back is CNBC aired its Markets in Turmoil special last night, which has historically proven to be an ideal time to invest.

Leftover Crumbs

  • Intuit is opening its wallet. Intuit, the company behind popular tax service TurboTax, is paying $7.1 billion in cash and stock for personal finance startup Credit Karma. The acquisition of Credit Karma, which boasts 100 million users and more than $1 billion in revenue, is the largest in Intuit's history. "By joining forces with Credit Karma, we can create a personalized financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they’ve always dreamed about, pay for education and take the vacation they’ve always wanted," said Intuit CEO Sasan Goodarzi.

  • Buying their way into China. PepsiCo is acquiring Chinese snack company Be & Cheery, which sells snacks on various Chinese e-commerce websites, for $705 million. PepsiCo said the acquisition will help the company achieve its goal of becoming China's top food and beverage company. "Be & Cheery adds direct-to-consumer capability, positioning us to capitalize on continued growth in e-commerce, and a local brand that is able to stretch across a broad portfolio of products, through both online and offline channels," Ram Krishnan, CEO of PepsiCo Greater China, said.

  • More fake meat coming to market. Cargill, the largest privately held corporation in the United States, is entering the market for plant-based meat to take on Beyond Meat and Impossible Foods. Cargill's private label plant-based patties and ground products will hit shelves and restaurants in April. "We've created some of the best tasting products available in the plant-based category today," said Elizabeth Gutschenritter, managing director of Cargill's alternative protein team. "We've combined our deep knowledge of plant proteins with our expertise in R&D, product development and production to deliver products consumers will love."

  • At least they'll pay you. User data has become so vital to Facebook that the company is now willing to pay people for it. Through their new market research app, Viewpoints, Facebook will pay users to upload a recording of their voice to train their speech recognition system. A user can earn $5 by logging into the app, saying "Hey Portal" and saying the name of ten friends five times. "Participants record phrases within the app, which helps us improve name pronunciation recognition in our products to better serve the people that use them," said a Facebook spokesperson.

  • Libra has a new partner. Facebook's cryptocurrency project Libra, which lost backers such as Visa, Mastercard and PayPal last year, announced Shopify is joining the Libra Association. As part of the membership, Shopify will contribute $10 million and operate a node that processes transactions for the Libra cryptocurrency. "As a member of the Libra Association, we will work collectively to build a payment network that makes money easier to access and supports merchants and consumers everywhere," Shopify said.