(Reuters) - Concerns over how the spreading coronavirus outbreak will impact growth in the U.S. and abroad is hitting stocks and pushing investors into haven assets.
Many worry that a potentially sizeable drop in Chinese markets — due to open Monday after being shut since Jan 23 —will weigh on stocks around the globe.
* BONDS: U.S. 10-yr Treasury yield US10YT=RR falls to 1.532
* FOREX: Dollar index .DXY down 0.4% at 97.47, while dollar falls 0.5% against the Japanese yen JPY=.
RANDY FREDERICK, VICE PRESIDENT OF TRADING AND DERIVATIVES FOR CHARLES SCHWAB IN AUSTIN, TEXAS
“Chinese markets are due to reopen on Monday after being closed for a week. They haven’t had an opportunity to gap down. I think this is preemptive selling ahead of the downturn that we are going to see over in Asian markets.”
“Our markets have had the ability to react each day. The Chinese market is going to have a whole week’s worth of reaction all at once. That’s a pretty ominous thought. I think people are selling ahead of that.”
“We don’t really know how this is going to play out. I certainly think it is a little bit too risky to be buying right now and trying to buy this dip. We have seen people dip-buy on Tuesday and yesterday afternoon. I think they are probably regretting it now.”
SCOTT LADNER, CHIEF INVESTMENT OFFICER AT HORIZON INVESTMENTS, CHICAGO
“The liquidity situation is certainly hampering stuff right now. Having China closed right now is not helpful and coming into the weekend people are certainly freaked out about the next couple of days.”
“We wouldn’t think this would be terribly prolonged but certainly it matters today and the data outside of Amazon has been ... on the soft side, so we don’t have the buttress of super-strong data to kind of turn the narrative away from the obvious uncertainty that is out there with this virus.”
MICHAEL JAMES, MANAGING DIRECTOR OF EQUITY TRADING, WEDBUSH SECURITIES, LOS ANGELES:
“I don’t think there’s any one thing that’s driving it. It’s just a combination of the coronavirus continuing to weigh on sentiment, and the fact that it continues to worsen and not stabilize in terms of the number of victims, and today you had the story of somebody possibly in New York. So it’s the combination of that cloud continuing to hang over the market.
“(With) a lot of uncertainty ... from both China’s market reopening and any new updates on the coronavirus and the potential impact, you’re seeing multiple reductions and risk-off mentality today.”
“The magnitude of the decline this week is more than I personally had expected to see, but given the growing concerns, I don’t think it’s that dramatic. We basically returned to where the S&P is flat on the year.”
PHIL ORLANDO, CHIEF EQUITY MARKET STRATEGIST AT FEDERATED INVESTORS
“We’re of the mind that stocks could fall 5 to 8 percent from their record highs, with maybe as much as a 10 percent correction. There’s going to be a definite hit to earnings and GDP but we think that we will make that up in the second half of the year. We see taking profits from growth stocks that have had an absolutely fantastic run and moving into the safety trade of US dollar, Treasuries, and dividend paying sectors like REITs, healthcare and utilities. Treasuries are in a bubble and that bubble will only inflate higher the longer this goes on. We think the 10 year will test cycle lows and then climb back up to 2 percent once we’re past it.”
“The real interesting thing has been the move in the long end (in Treasuries). That’s the combination of not only the ‘risk off’ and I’ve got to put my money somewhere safe haven sort of thing, but some of the data has been bad, so I think this is also a play that long end yields can go lower regardless of how the virus plays out.”
“It’s likely that over the next month we could do a lot of work and have some real moves back and forth as we find out what happens with the coronavirus.”
“There’s several different numbers. One of the numbers is the number of confirmed cases of coronavirus. But there’s a shadow number that they have of expected cases. There are expected cases that they won’t know the results for some time. So I expect for the next week, every day, the headline number that people see to get worse. I expect a lot of volatility each day if those numbers get posted. It will take a while for the markets to digest it.”
“I’m not taking a big view of ‘buy the market’ or ‘sell the market.’ We expect that the market will be somewhat volatile for the next two months, maybe the next three, so we’re more likely to be long volatility out two months.”
ELLIS PHIFER, MARKET STRATEGIST FOR RAYMOND JAMES, MEMPHIS, TN
“It’s going to be the weekend, and people don’t like to be really long on risk assets going into the weekend. When we have these troubled times you’ll see people de-risking ahead of the weekend. And part of that de-risking now is worries about what happens when (markets in) China open.”
“The virus news is pushing what’s happening. Not impeachment. I think (markets) have priced in an acquittal.”
“I don’t think people are surprised there are more virus cases. What it goes from here is going to be the real question. Last week as soon as this started getting news attention I suggested this could be something to push rates down quickly.”
“In the bond market we have seen implied volatility move up quite dramatically.”
“When we take a look at the overall picture heading into the week, there was some optimism that we could still see strong earnings. There’s anticipation that eventually we’re going to see a trickle-down effect of the Phase One trade deal with China. Right now, none of those matters. It’s all about the virus and its impact on the Chinese economy and its trading partners.”
“The concern is that the virus is spreading and the death toll is rising. What’s further concerning is that we probably haven’t seen the peak just yet. It is spreading before having any containment efforts. The uncertainty with respect to the virus’ impact to China and the global economy is what’s driving this move.”
Americas Economics and Markets Desk; +1-646 223-6300