Barron\'s 03.16.2020

(やまだぃちぅ) #1

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
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