| Monday's Headlines 1. US markets see biggest drop in two years 2. 2020 gains wiped out as investors bail out of stocks 3. 25% of companies mentioned the coronavirus in earnings reports 4. Day trading spikes following brokers move to free trading Markets Closed
 Markets Today U.S. stocks suffered their biggest one-day drop in two years today as investors pressed and held the sell button after news that the coronavirus had spread to several new countries. Every sector of the S&P 500 was in the red today as investors sold across the board, wiping out all of the gains made in 2020 thus far. However, while all sectors declined, not all of them declined evenly. The traditionally "defensive" utilities and real estate sectors declined only 1.2% and 1.4% respectively, while the more cyclical tech and energy sectors declined 4.3% and 4.6%. The energy industry was hit particularly hard because the coronavirus has been putting downward pressure on the demand for oil as fewer people are traveling and industries put their supply chains in a holding pattern. Oil prices dropped nearly 4% today alone. Tech firms have been hurt because of how many electronics products and components are produced in China, the epicenter of the outbreak. Cruise line stocks have also been heavily hit by the virus's spread.
While investors are selling stocks, they've also been buying U.S. Treasurys and gold. The 10-year treasury yield dropped to its lowest level since 2016, while gold prices jumped to levels not seen since 2013.
Investors are in full risk-off mode now. Headlines:
chart courtesy YCharts.  Putting Today's Drop into Perspective While today's sell-off was intense, the DJIA, which fell 1,031.6 points or 3.4%, fell by larger amounts twice in early February of 2018 as the U.S.- China trade war ratcheted up. Big declines, while scary, are a natural part of the market cycle. Fear and uncertainty played a big part in today's carnage, but that's also natural.
It's important to remember that the S&P 500 has daily drops of 2% or more 2-3 times per year. It barely happened in 2019, and didn't happen at all in 2017, but it has happened 260 times since 1990, and the market is up 1640% in that time.
chart courtesy LPLFinancial  Companies Are Scared Investors are reacting to what they are hearing from companies, and what they are hearing is a whole lot of fear and uncertainty. That started out in the technology, industrial, and travel sectors, but has since spread to all sectors of the market. Goldman Sachs tracked mentions of the word "coronavirus" during the earnings reporting season that just passed, and found 143 companies of the S&P 500 mentioned the outbreak and the potential impact to their businesses. It has become a dominating concern.
chart courtesy Goldman Sachs  Free Trades Are Causing a Trading Frenzy An interesting side note to this recent market volatility is that individual investors have been taking matters into their own hands in a big way since online brokers removed trading commissions on stocks and ETFs. Recent data from online brokers E*TRADE and TDA, compiled by Sundial Research, shows an explosion in trading volume at the end of 2019 and into this year.
While online brokers like the trading activity, individual investors should not be lured into trading on every whim or big market move. There was a lot of activity around Tesla's recent spike and drop, and over the past week as markets have been volatile. But it's an easy way to lose money, especially in times of intense market gyrations.
chart courtesy Sundial Research
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(chart courtesy YCHARTS)  Biotech firm United Therapeutics rose today after the Food and Drug Administration (FDA) cleared one of its drug delivery systems for wider use. Biotech firm Gilead Sciences also rose today after the World Health Organization (WHO) said that its drug remdesivir may be able to treat the coronavirus.  Kosmos Energy fell today after reporting losses in its most recent earnings report, despite higher revenue. A number of other energy companies such as PBF energy, Patterson-UTI energy, and Transocean fell as low oil and gas prices continued to put pressure on them. A number of cruise lines including, Carnival and Norwegian, dropped today on the news of the coronavirus spreading further around the world. Word of the Day Risk-on risk-off is an investment setting in which price behavior responds to and is driven by changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns.  Justin Sullivan/Getty Images
Today in History February 24, 1955 Today in 1955, Steve Jobs, co-founder of Apple, was born. Jobs dropped out of college and went to work for the videogame company, Atari. He and his friend Steve Wozniak developed a new computer logic board in 1976, which they called the Apple I. They went into business together, founding Apple Computer in 1977, and completed the Apple II personal computer the same year. The computer sold fantastically and the company had gone public by 1981. However, after the initially unsuccessful launch of the Macintosh computer, Jobs was removed from the company in 1985. Jobs went on to form "NeXT" a company which designed computers for schools, and acquired a controlling interest in computer graphics firm, Pixar. He built Pixar into a major studio, producing the first computer-animated feature film, Toy Story, and launching an IPO that made him a billionaire. Apple's board of directors asked him to lead the company again in 1997, and the next year, Apple released the iMac, which was a tremendous success. Jobs delivered more innovation, launching iTunes and the iPod in 2001, and the iPhone in 2007. Jobs was first diagnosed with pancreatic cancer in 2003, but recovered after surgery. However, in 2009 his health declined again, and by 2011, he resigned, and died later that year.
Source: https://www.britannica.com/biography/Steve-Jobs
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Monday, February 24, 2020
Risk-Off
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