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| Wall Street Has Lost Its Nerve. What Will It Take to Get It Back? | Wall Street Has Lost Its Nerve. What Will It Take to Get It Back? |
| (about 3 hours later) | |
| Wall Street has often adopted a simple playbook when facing a stock market plunge: “Buy the dip.” Not lately. | Wall Street has often adopted a simple playbook when facing a stock market plunge: “Buy the dip.” Not lately. |
| In recent years, investors who jumped on downturns as chances to buy shares at bargain prices have profited from the move. Their buying, in turn, helped stabilize prices, snuffing out slumps before they morphed into panics. | In recent years, investors who jumped on downturns as chances to buy shares at bargain prices have profited from the move. Their buying, in turn, helped stabilize prices, snuffing out slumps before they morphed into panics. |
| But last week, as coronavirus cases turned up around the world and new information kept pouring in — photographs of deserted business districts in Milan, a stark warning from an official at the Centers for Disease Control and Prevention on Tuesday, news that a single Google employee in Switzerland had tested positive for the virus on Friday — big investors across Wall Street lost their nerve, interpreting the steep fall in share prices not as an invitation to go bargain-hunting but as a reason to dump more stock. | But last week, as coronavirus cases turned up around the world and new information kept pouring in — photographs of deserted business districts in Milan, a stark warning from an official at the Centers for Disease Control and Prevention on Tuesday, news that a single Google employee in Switzerland had tested positive for the virus on Friday — big investors across Wall Street lost their nerve, interpreting the steep fall in share prices not as an invitation to go bargain-hunting but as a reason to dump more stock. |
| “This is one of the few times in recent history where we’ve seen them meeting that with selling and not buying,” said Mike Lewis, head of U.S. equity cash trading at Barclays, referring to big investors like hedge funds and pension funds that tend to employ sophisticated trading strategies. | “This is one of the few times in recent history where we’ve seen them meeting that with selling and not buying,” said Mike Lewis, head of U.S. equity cash trading at Barclays, referring to big investors like hedge funds and pension funds that tend to employ sophisticated trading strategies. |
| The result: the worst weekly rout for stocks since the 2008 financial crisis. | The result: the worst weekly rout for stocks since the 2008 financial crisis. |
| The coming week will be another test for investors. Wall Street culture fetishizes forecasts and figures. Analysts and investors are rewarded for their ability to correctly gauge risk, incorporate those assessments into accurate forecasts and then make trades based on them. As a result, investors despise uncertainty, because it makes it difficult to generate good guesses about the future. | The coming week will be another test for investors. Wall Street culture fetishizes forecasts and figures. Analysts and investors are rewarded for their ability to correctly gauge risk, incorporate those assessments into accurate forecasts and then make trades based on them. As a result, investors despise uncertainty, because it makes it difficult to generate good guesses about the future. |
| And uncertainty is pervasive right now. The coronavirus — highly contagious, with new cases emerging daily, and millions still facing lockdowns in the world’s second-largest economy, China — is creating exactly the kind of unpredictability that makes investors fret. There is little clarity about how long it will take governments and health officials to contain the virus, leading to a gloomy prognosis for global economic growth. Supply chains remain deeply disrupted. Consumer spending may suffer if daily life is disrupted by the virus. | And uncertainty is pervasive right now. The coronavirus — highly contagious, with new cases emerging daily, and millions still facing lockdowns in the world’s second-largest economy, China — is creating exactly the kind of unpredictability that makes investors fret. There is little clarity about how long it will take governments and health officials to contain the virus, leading to a gloomy prognosis for global economic growth. Supply chains remain deeply disrupted. Consumer spending may suffer if daily life is disrupted by the virus. |
| Markets are as precarious as they’ve been since stocks started climbing in March 2009 after the financial crisis. In such cases, investors tend to sell to limit their losses or wait for clarity to emerge, which could take weeks, if not months. | Markets are as precarious as they’ve been since stocks started climbing in March 2009 after the financial crisis. In such cases, investors tend to sell to limit their losses or wait for clarity to emerge, which could take weeks, if not months. |
| “You need to show that the virus is under control,” said Jack Janasiewicz, a portfolio manager with Natixis Investment Managers. “Until that happens, we’re going to be in these volatile swings.” | “You need to show that the virus is under control,” said Jack Janasiewicz, a portfolio manager with Natixis Investment Managers. “Until that happens, we’re going to be in these volatile swings.” |
| But instead, federal health officials have warned that the virus will spread. Over the coming days, Americans will probably hear updates on new infections, and perhaps deaths. (The first reported virus death in the United States, of a man in Washington State, was announced on Saturday.) | But instead, federal health officials have warned that the virus will spread. Over the coming days, Americans will probably hear updates on new infections, and perhaps deaths. (The first reported virus death in the United States, of a man in Washington State, was announced on Saturday.) |
| Already, during last week’s panic, updates on even a single new infection were at times enough to move multitrillion-dollar financial markets. The most recent economic data has been bleak. Official Chinese surveys of activity in the factory sector released over the weekend, showed even deeper contraction than expected. | Already, during last week’s panic, updates on even a single new infection were at times enough to move multitrillion-dollar financial markets. The most recent economic data has been bleak. Official Chinese surveys of activity in the factory sector released over the weekend, showed even deeper contraction than expected. |
| The jitters could continue. | The jitters could continue. |
| “Anytime you see another headline, you almost instantaneously see a reaction in the markets,” said Subadra Rajappa, head of U.S. rates strategy at Société Générale in New York, said Friday. “Clearly there’s a lot of skittishness.” | “Anytime you see another headline, you almost instantaneously see a reaction in the markets,” said Subadra Rajappa, head of U.S. rates strategy at Société Générale in New York, said Friday. “Clearly there’s a lot of skittishness.” |
| Even if, as is now expected, the Federal Reserve cuts interest rates this month, an action that has been a balm for market woes over the last decade, that may not be enough to put things back on a surer footing. | Even if, as is now expected, the Federal Reserve cuts interest rates this month, an action that has been a balm for market woes over the last decade, that may not be enough to put things back on a surer footing. |
| “The playbook for the last 10 years, you should throw out the window,” Alan Fournier, who trades his own money through a family office in Summit, N.J. “Because this virus doesn’t care what the Fed does.” | “The playbook for the last 10 years, you should throw out the window,” Alan Fournier, who trades his own money through a family office in Summit, N.J. “Because this virus doesn’t care what the Fed does.” |
| Since the 2008 financial crisis ended, America’s decade-long economic expansion has hardly been smooth. But when growth faltered, the Fed has reliably stepped in to act — pumping new money into financial markets or cutting interest rates, or both. | Since the 2008 financial crisis ended, America’s decade-long economic expansion has hardly been smooth. But when growth faltered, the Fed has reliably stepped in to act — pumping new money into financial markets or cutting interest rates, or both. |
| Those actions kept the economy chugging, and helped stocks rebound. The dynamic repeatedly rewarded investors who used market setbacks as buying opportunities. | Those actions kept the economy chugging, and helped stocks rebound. The dynamic repeatedly rewarded investors who used market setbacks as buying opportunities. |
| Updated June 5, 2020 | Updated June 5, 2020 |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission. | Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission. |
| Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home. | Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home. |
| States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. | States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications. | Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications. |
| The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing. | The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing. |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. | If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. |
| But this time, traders, investors and analysts expect any action from the Fed to have limited impact, at least on the economy. Unlike previous periods of stress, including the U.S. government shutdown fights in 2011 or the trade war with China that started in 2018, the current crisis of confidence is tied more to epidemiology than economics. | But this time, traders, investors and analysts expect any action from the Fed to have limited impact, at least on the economy. Unlike previous periods of stress, including the U.S. government shutdown fights in 2011 or the trade war with China that started in 2018, the current crisis of confidence is tied more to epidemiology than economics. |
| So whether the market turns around depends on those who make health policy and communicate information to the public, rather than officials who determine monetary policy. | So whether the market turns around depends on those who make health policy and communicate information to the public, rather than officials who determine monetary policy. |
| The Fed can still help calm market fears to some extent. On Friday, a brief statement from the Fed that it stands ready to support the economy helped the market rally off the worst of its lows. More soothing words could come in the days ahead, potentially reversing some of last week’s decline in stocks. | The Fed can still help calm market fears to some extent. On Friday, a brief statement from the Fed that it stands ready to support the economy helped the market rally off the worst of its lows. More soothing words could come in the days ahead, potentially reversing some of last week’s decline in stocks. |
| But even if markets see a short-term bounce, it could take longer to restore the investor confidence — or complacency — that pushed stocks to record highs a little more than a week ago. After all, investors just endured the second-worst week for the S&P 500 stock index since 1941 and one the fastest 10 percent declines on record. Nose dives like that are psychological events for investors as much as financial ones. | But even if markets see a short-term bounce, it could take longer to restore the investor confidence — or complacency — that pushed stocks to record highs a little more than a week ago. After all, investors just endured the second-worst week for the S&P 500 stock index since 1941 and one the fastest 10 percent declines on record. Nose dives like that are psychological events for investors as much as financial ones. |
| “The positive economic outlook that people had for 2020 and beyond that was not realistic,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The coronavirus helped bring that down and the stock market helped bring that down. But I don’t think you can put Humpty Dumpty back on the wall again.” | “The positive economic outlook that people had for 2020 and beyond that was not realistic,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The coronavirus helped bring that down and the stock market helped bring that down. But I don’t think you can put Humpty Dumpty back on the wall again.” |
| What’s most needed, investors say, is time. It will take weeks before the American public and investors have enough information to know if the country is facing significant economic disruption from the outbreak or a relatively benign scenario in which the spread of the virus is relatively quickly brought under control. It will also take weeks before the impact of the outbreak appears in economic data. Analysts will watch government economic reports for indications that news coverage of the virus, and the market’s tumble, spooked shoppers and threatens consumption, the main engine of U.S. growth. | What’s most needed, investors say, is time. It will take weeks before the American public and investors have enough information to know if the country is facing significant economic disruption from the outbreak or a relatively benign scenario in which the spread of the virus is relatively quickly brought under control. It will also take weeks before the impact of the outbreak appears in economic data. Analysts will watch government economic reports for indications that news coverage of the virus, and the market’s tumble, spooked shoppers and threatens consumption, the main engine of U.S. growth. |
| “It is not the kind of thing that the market will quickly bounce back from,” said Ajay Rajadhyaksha, an analyst with Barclays in New York. “They will need to see evidence through the passage of time.” | “It is not the kind of thing that the market will quickly bounce back from,” said Ajay Rajadhyaksha, an analyst with Barclays in New York. “They will need to see evidence through the passage of time.” |
| Kate Kelly contributed reporting. | Kate Kelly contributed reporting. |