12 BARRON’S March 16, 2020
REVIEW
23,185.
Dow Industrials:-2,679.
Dow Global Index:-50.
0.95%
10-year treasury note:+0.
STOCKS RECOVER LOSSES
The Bull Succumbs
One thing leads to another. A novel
virus triggered an oil-price war, and
stocks opened in free-fall on Monday,
off 7%, triggering a circuit breaker. The
Dow sank over 2,000 points, or 7.8%,
then recovered 1,200 on Tuesday, with
Treasuries firming. On Wednesday, the
Dow industrials dove another 1,
points, ending the 11-year bull market,
and Thursday was the Dow’s worst day
since the1987 market crash, despite
the Federal Reserve’s $1.5 trillion inter-
vention in short-term lending markets.
Stocks rallied on Friday, with the Dow
on the week down 10.46%, to 23,172.97;
the S&P 500 off 8.86%, to 2709.03;
and the Nasdaq Composite shedding
8.18%, to 7874.23.
Curve of a Pandemic
The World Health Organization de-
clared Covid-19 a pandemic, as the
U.S. retreated from “containment” to
“mitigation.” Italy quarantined the
entire country of 60 million. In the
U.S., state and local officials scram-
bled to handle clusters of infections,
though testing remained sporadic.
Events were canceled, schools closed,
and workers sent home. Multiple
members of Congress, including
Texas Sen. Ted Cruz, may be infected;
actor Tom Hanks and his wife said
they were, as did Canadian Prime
Minister Justin Trudeau’s wife. The
House planned to vote on a package
to support the uninsured and those
lacking sick leave, and to make test-
ing free. President Trump cut off
travel from Europe (but not the
United Kingdom) for 30 days in an
Oval Office TV speech and pushed to
suspend the payroll tax. On Friday,
he declared a national emergency.
An Oil War
As Covid-19 chewed a third off oil
prices, Russia and the Saudi-led Or-
ganization of Petroleum Exporting
Countries tried to reduce output to
stabilize prices. But Russia balked,
and Saudi Arabia hiked output and
drove U.S. prices to $31 a barrel, the
deepest one-day dive since the 1991
Gulf War. Although Trump cheered
lower U.S. oil prices, U.S. shale-oil
producers found themselves strug-
gling to support their debt. On Tues-
day, Saudi Arabia boosted output
again, to 13 million barrels a day.
Biden Sweeps
Former Vice President Joe Biden
stormed through primaries in six
states, beating Vermont Sen. Bernie
Sanders in Mississippi and in a deci-
sive victory in Michigan. In all, Biden
won four states, extended his delegate
lead and setting himself up for favor-
able primaries in the next few weeks.
Sanders said he would stay in the race.
Annals of Deal Making
Elliott Management agreed to leave
Twitterfounder Jack Dorsey in place
as CEO...Insurance brokerAonsaid it
would buy rival Watson Wyatt for al-
most $30 billion in stock...With shares
ofOccidental Petroleumfalling, Carl
Icahn upped his stake from 2.5% to
10%...PepsiCosaid it would pay $3.
billion for RockstarEnergy Beverages.
Some Lessons
From China
As the U.S. grapples with the coronavirus, China gives
reason for hope. Its rate of new cases is a fraction of peak
levels. Chinese stocks had recouped much of their earlier
losses, with the country’s CSI 300 Index near its 52-week
high before the latest global rout; even now, it’s down less
than 5% for the year. While China isn’t fully in the clear,
and while it’s uncertain how the outbreak will unfold in
the U.S., money managers see lessons in China’s progress.
Crisis stocks.Industrials that benefited from stimu-
lus, health-care companies, and stocks that were winners
before the outbreak—Alibaba Group, Tencent Hold-
ings, JD.com—have done well. One reason: The out-
break accelerated trends, such as the shift to e-commerce.
“Recently, we are seeing more older people shopping
online,” says Patricia Ribeiro, manager of the American
Century Emerging Markets fund. “They were forced to
do so because of the virus and are now slowly adapting.”
Policy matters.China enacted policies to cushion the
impact, such as tax cuts, rebates, interest-rate cuts, and loan
leniency. “If China is a test case, then the right response is
to protect small and medium-size enterprises—and even
larger companies—from a cash-flow crunch,” says Pine-
Bridge Investments’ global head of equities, Anik Sen.
Key metrics.Chinese markets turned up as new cases
began going sideways. If theU.S. reacts like China out-
side of Hubei province, says Deutsche Bank Security’s
chief economist Torsten Sløk, the infection rate could
begin to flatten in the next week or so, though risks are
rising that the U.S. will be on a different trajectory. So
that’s a big if.—Reshma Kapadia
90 K
The International Energy
Agency’s estimate this past
Monday of the daily decline in
oil output for 2020
76
High hit by the Cboe Volatility
Index on Thursday, the highest
since November 2008
36.8%
Percentage of those 25 or older
with at least a college degree
who worked at home some of
the time in 2018
150 M
One high estimate of how many
Americans could get infected by
Covid-19. The low: 70 million.
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THE NUMBERS
HE SAID
“The system
is not really
geared to what
we need right
now...It is a
failing, let’s
admit it.”
Dr. Anthony Fauci, director of the
National Institute of Allergy and
Infectious Diseases, on
coronavirus testing.Illustration by Elias Stein; Photograph by Andrew Harrer/Bloomberg