U.S. stocks started the second quarter with deep losses as investors braced for a longer economic shutdown that’s likely to devastate corporate profits and dividends. The dollar rose with Treasuries.
The S&P 500 fell for the third time in four days, with sentiment souring after President Donald Trump warned of a “painful” period of the pandemic. A report on private payrolls showed fewer job losses than anticipated, but it only measured through March 12.. Factory data that’s expected to show contraction is due at 10 a.m., while expectations are that Friday’s jobs report will show a loss of 100,000 positions.
U.S. stocks endured the worst quarter since 2008 as the pandemic shut down large swaths of the economy. Losses from the S&P 500’s February record reached 34 per cent before an unprecedented government spending plan sparked a furious three-day rally of 18 per cent. Since then, the index is down almost five per cent as signs mount that the downturn will be longer than previously thought.
“You had a pretty sharp bear market rally, which typically happens, and now you’re faced with some bad news ahead,” said Aaron Clark, portfolio manager at GW&K Investment Management, which has about $42 billion in assets. “Clearly the news is going to be horrible whether from new cases and the economic news, earnings will crater big time.”
Banks bore the brunt of selling Wednesday on speculation the largest will be forced to cut dividends after European lenders including HSBC Holdings Plc and Standard Chartered Plc halted payouts and share buybacks. The region’s Stoxx 600 index sank, even after the European Union unveiled plans to save jobs during the crisis. The euro extended its drop as manufacturing data from the single-currency region painted a bleak picture, with Italy’s purchasing managers’ index posting a record drop.
Stocks are beginning the new quarter with more declines, hot on the heels of the worst quarter for global shares since 2008. Investors disappointed with the loss of dividend income could spark a fresh wave of selling, knowing that analysts are dashing to update earnings forecasts to take into account the looming global recession and the slump in stock prices.
“Markets are looking at global equities in a new light, one with no buyback support and no dividends,” said Chris Weston, head of research at Pepperstone Financial Pty Ltd. The earnings season is likely to trigger a decline in consensus S&P 500 profit expectations which “are far too high relative to dividend futures,” he said.
Elsewhere, West Texas oil fluctuated around $20 a barrel after Trump’s pledge to meet with feuding producers Saudi Arabia and Russia to support the market failed to bolster prices substantially.
Stocks in Japan fell almost four per cent, while Hong Kong shares also dropped. Chinese equities outperformed as a private reading on the country’s PMI beat expectations, rebounding in March.
These are the main moves in markets:
Stocks
- The S&P 500 Index fell 3.6 per cent as of 9:31 a.m. New York time.
- The Stoxx Europe 600 Index decreased 3.2 per cent.
- The MSCI Asia Pacific Index fell two per cent
Currencies
- The Bloomberg Dollar Spot Index increased 0.8 per cent.
- The euro decreased 0.9 per cent to US$1.0925.
- The British pound declined 0.2 per cent to US$1.2397.
- The Japanese yen rose 0.2 per cent at 107.36 per dollar.
Bonds
- The yield on 10-year Treasuries dipped eight basis points to 0.59 per cent.
- Germany’s 10-year yield fell two basis points to -0.49 per cent
- Britain’s 10-year yield decreased seven basis points to 0.289 per cent
Commodities
- Gold fell 0.4 per cent to US$1,588 an ounce.
- West Texas Intermediate crude fell 0.2 per cent to $20.44 a barrel.
–With assistance from Robert Brand and Adam Haigh.
