Stock Futures Plunge and Bonds Hit Record Lows as Coronavirus Market Rout Continues

March 6, 2020 Updated: March 6, 2020

In morning trading Friday, U.S. stock futures were flashing more downward pressure on equities, while safe-haven bonds rallied to new records as the spread of the new coronavirus continued to roil markets.

Futures for the main Wall Street equities indexes—the Dow Jones (DJIA), Nasdaq (NQ1), and S&P 500 (SP1)—were all down by over 2 percent at 8:16 am EST on March 6.

The Wall Street “fear gauge,” or the VIX volatility index, was up nearly 20 percent, hitting 47.46 at 8:16 am EST. A level above 31 on the VIX is considered a sign of major uncertainty and investor fear.

Epoch Times Photo
Table showing the main Wall Street indexes and their futures markets, along with the VIX volatility index and its futures market, and the 10-year and 30-year US Treasurys. (Courtesy of TradingView)

“We had expected volatility to pick up in 2020 and that materialized dramatically as the virus concerns spread more widely, but volatility and fear reached extremes as the month of February ended,” said Scott Krase, President at CrossPoint Wealth, in an emailed statement to The Epoch Times.

“In the short term, as in weeks, the markets will react to headline news, which is transitory,” Krase said, adding that “despite ongoing concerns of the likely spread of the coronavirus, economic fundamentals continue to look solid.”

The Labor Department’s closely watched monthly employment report issued Friday showed solid monthly wage growth and the jobless rate falling back to near a 50-year low of 3.5 percent. The figures also indicated that U.S. employers maintained a robust pace of hiring in February, giving the economy a strong boost as it confronts the coronavirus outbreak.

Nonfarm payrolls increased by 273,000 jobs last month, matching January’s tally, which was the largest since May 2018.

Still, in a sign of financial market distress, the 10-year U.S. Treasury note yield plummeted by over 22 percent to hit new historic lows Friday.

The benchmark 10-year note yield briefly tagged 0.7 percent before ticking back up to 0.716 percent at 8:16 am EST. At the same time, U.S. 30-year bonds were trading south of 1.29 percent.

Bond yields move in the opposite direction of prices, with falling yields a sign of investors seeking refuge.

“With bonds surging and yields at historic lows, concerns are we will get some kind of economic slowdown and it may be worse than initially factored in,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.

Epoch Times Photo
US 10-year Treasury yields hit new record lows on March 6, 2020. (Courtesy of TradingView)

Global stock markets tumbled Friday as the number of coronavirus infections neared 100,000 and the economic damage wrought by the outbreak intensified.

An increasing number of people faced a new reality as many were asked to stay home from work, schools were closed, large gatherings and events were cancelled, stores were cleared of staples like toiletries and water, and face masks became a common sight.

At least 57 new cases of coronavirus were confirmed in the United States, as the virus struck for the first time in Colorado, Maryland, Tennessee, and Texas, as well as San Francisco in California. Some 230 people have been infected in total and 12 have died.

Central banks across the globe, including the U.S. Federal Reserve, the Bank of Canada, the Reserve Bank of Australia and the Malaysian central bank, have eased this week, with others expected to follow soon, including the Bank of Japan.

The Federal Reserve announced a 50 basis point rate cut on Tuesday, which was first met with investor enthusiasm but was quickly followed by a selloff amid worries the central bank was acting on downbeat news that markets were not aware of.

Fed Chair Jerome Powell acknowledged the economy’s strong fundamentals, but said “the coronavirus poses evolving risks to economic activity.”

The interest rate futures market is now pricing in a 100 percent chance of another rate cut in March.

Reuters contributed to this report.

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