MARKET MESS: Stock prices tumbled so sharply at the opening bell a circuit breaker meant to slow down panic trading was triggered, halting all activity for 15 minutes. That appeared to work as intended, but the Dow, S&P 500 and Nasdaq are all down sharply, between 6% and 7%. Treasury bonds continue to grow more expensive with so many investors looking for a safe place to park their money. The 30-year Treasury yield fell to all-time lows below 1%. The 10-year Treasury, which fell below 1% last week, is plumbing new depths Monday.
ENERGY DRAIN: A clash between Saudi Arabia and Russia is sending shock waves through energy markets, with wide-ranging implications for consumers, industries, and of course, big oil companies. The single-day plunge in U.S. crude prices surpassed declines that occurred shortly after the Sept. 11 attacks. The price of U.S. crude fell as much as 34% to $27.34 a barrel. Energy companies had already been pulling back on spending with clear signs of slowing global economic growth. Investors dumped shares of some of the biggest producers in the world. On Monday, stock in Marathon Oil plunged 40%. Occidental Petroleum slumped 35%. The winners, at least at the pump, will be consumers, though no one knows when gasoline prices will fall.
Diamondback Energy on Monday said it would reduce the number of well activation crews by a third. It also expects to drop two drilling rigs next month and a third later in the second quarter. Parsley Energy is cutting back, too. Energy analysts at Stifel downgraded a dozen companies in the sector, citing the clash between Saudi Arabia and Russia.
NO OCEAN CRUISE: Since a ship was quarantined for two weeks off of Yokohama, Japan, few sectors have been harder hit by the virus than the cruise industry. It got worse over the weekend. The U.S. State Department has issued an advisory against travel on cruise ships, particularly for travelers with underlying health conditions. Separately, the CDC noted an “increased risk of infection of COVID-19 in a cruise ship environment.” On Monday, shares of Royal Caribbean Cruises fell 25%, shares of Norwegian Cruise Line fell 18% to an all-time low. Carnival fell 17%.
Federal and state officials in California prepared to receive thousands of people Monday from a cruise ship that has been idling off the coast of San Francisco with at least 21 people aboard infected with the coronavirus. Fences were being installed at an 11-acre site at the port of Oakland, as authorities readied flights and buses to whisk the more than 2,000 passengers aboard to military bases or their home countries for a 14-day quarantine. More than 3,500 people on the ship hail from 54 countries. The Regal Princess cruise ship was finally allowed to pull into a Florida port and passengers began disembarking after two crew members tested negative for coronavirus. The Regal Princess was originally to have docked Sunday morning in Port Everglades but instead spent most of the day sailing up and down the coast.
DODGING LODGING: Another sector within the hospitality industry, hotels, have been heavily damaged by the spread of the virus. With companies canceling or postponing business travel and conventions, and airlines suspending flights, room cancellations, or rooms never booked, are soaring. Analysts with Raymond James said Monday that most investors have been “overly optimistic” about the impact on hotels. Shares in Hyatt Hotels are down more than 6% Monday. Hilton fell more than 4%.
MALLED: The spread of the virus is hitting closer to home with the majority of states now reporting cases of COVID-19. That will affect the behavior of millions of people in public, including trips to the mall. On Monday, shares of mall operators, including Simon Property Group, Macerich and Tanger Factory Outlet Centers slid between 8% and 9%. Mall anchor stores like Macy's, Kohl's and Nordstrom, are down between 6% and 8%. Those stores are down between 26% and 36% in the past month.
BANKS SHOT: Banks took a body blow last week when the U.S. Fed made a surprise cut to benchmark interest rates to protect the economy. Banks rely on interest payments from loans to generate capital, and they've already been operating in an extraordinarily low rate environment. On Monday, Morgan Stanley's chief U.S. economist, Ellen Zentner, said she now expects the Federal Reserve to follow its 50 basis point intermeeting rate cut with another 50 basis point interest rate cut in March, bringing the target range for the federal funds rate to 0.50-0.75%. Zentner also expects the March rate cut will be followed by a 25 basis point rate cut at the April meeting, bringing the fed funds rate into a 0.25-0.50% target range. JP Morgan Chase tumbled 12%, while Bank of America and Citi fell more than 14%.