| Thursday's Headlines 1. U.S. markets slammed as virus spreads and fatalities rise 2. Airline stocks grounded 3. Banks feel the margin pressure 4. How are individual investors feeling? Markets Closed
 Markets Today What a difference a day makes—especially these days. I wrote that yesterday, I know... but it applies to today as well, as markets were pummeled as investors bailed out of stocks as fast as they added them back on Wednesday. When the bell mercilessly rang, the DJIA shed 3.6%, while the S&P 500 and the Nasdaq lost 3.4% and 3.1%, respectively.
The number of new coronavirus cases and fatalities continues to increase outside of China, where they are actually leveling off. School districts in some cities in the U.S. are closing, companies are cancelling events and enforcing a "work from home" policy, and the domestic travel and hospitality industry is reeling from cancellations. IATA, the lobby for the airline industry, said the coronavirus could cost airlines $113 billion in revenue in 2020. Airline stocks were slammed today with shares of American Airlines and United falling 13% each.
This has investors on edge—especially the biggest institutional investors in the world who really move the markets. As we have been saying, volatility has been the dominant theme over the past 10 days. The S&P 500 has had 3% swings five times in the past eight trading sessions. That's not normal.  chart courtesy YCharts
Headlines:
 Bank Stocks Spanked It's been a very rough year for U.S. bank stocks. The economy was already starting to slow, and three interest rate cuts in 2019 cut into their profit margins. Remember—the lower interest rates go, the less net interest margin banks can make loaning money to businesses and consumers. Then Tuesday happened and the Fed slashed interest rates by 0.5% to try to back stop the economic impact of COVID-19. Traders are betting the Fed will cut rates again when it meets on March 18, if not before. All of this has driven the yield at the benchmark U.S. 10-year Treasury to all-time lows below 0.9%. Since many of the lending products banks sell, such as credit cards, mortgages, and car loans, are based off the 10-year, their margins will continue to be under pressure. Banks with the most exposure to consumers, like Bank of America, have suffered the most in the past two months, and it could get worse.  How Are Individual Investors Holding Up? In volatile times, it's hard for individual investors like us to keep our heads. We are not the ones causing these enormous market swings... we don't have that kind of firepower. Big institutions are moving in and out of markets at lightning speeds, and all we can do is watch and hope it settles soon. It will settle—we just don't know when.
It shouldn't surprise us to see that individual investors are feeling more bearish than they have since October when the U.S.-China trade talks were on thin ice. More than 60% of those surveyed by the American Association of Individual Investors are feeling bearish or neutral, which is about 8% more pessimism than average.
That said, nearly 40% of those surveyed feel like markets will be higher six months from now. They might be right, given the recent sell-off, but they also might not be facing the reality that markets could slide another 10–20% in the coming weeks if the coronavirus is not contained.
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(chart courtesy YCHARTS)  In the company's biggest gain in over 11 years, shares of Anthem rose by almost 16% today following Joe Biden's successful Super Tuesday results; Biden is typically seen as the better candidate for health insurers, and other private plan companies—including Cigna and UnitedHealth (both up nearly 11%)—also received a boost. Centene's stock price increased by nearly 16% as well, also likely as a result of Biden's victories, despite the managed care company reducing its 2020 earnings estimates over concerns of a potential Medicaid rate cut.  Dollar Tree fell the furthest today, its shares dropping by almost 4%, despite reporting its plans to renovate nearly 1,250 stores following its strong Q4 results. Halliburton's stock price decreased by just over 3.5%; the oil field service company today announced the pricing terms for two cash tender offers that were themselves originally announced in mid-February. Word of the Day A falling knife is a colloquial term for a rapid drop in the price or value of a security. The term is commonly used in phrases like, "don't try to catch a falling knife," which can be translated to mean, "wait for the price to bottom out before buying it." A falling knife can quickly rebound—in what's known as a whipsaw—or the security may lose all of its value, as in the case of a bankruptcy.  image courtesy loc.gov
Today in History March 5, 1933 Pres. Franklin D. Roosevelt signals that the nation's economic survival is at stake when he invokes the war powers conferred upon the presidency to take emergency action. FDR orders the nation's banks to close for the next four days to forestall panic and to prevent the hoarding of gold. The extended "bank holiday" stops the run on the banks and begins to restore public confidence.
The New York Times, March 6, 1933, p. 1; reprinted in Floyd Norris and Christine Bockelmann, The New York Times Century of Business (McGraw-Hill, New York, 2000), pp. 86–87.
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Thursday, March 5, 2020
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