Dow’s losses deepen as benchmark government bond carves out new record low

U.S. stocks lurched lower Thursday as anxieties about the world-wide spread of COVID-19 lingered and concerns about the ability of governments to control the impact of the disease on their economies sent the benchmark U.S. Treasury note yield to a fresh all-time low.

See:Why stocks tanked despite the Fed’s emergency rate cut

How are major benchmarks faring?

The Dow Jones Industrial Average
traded about 951 points, or 3.5%, lower, near 26,140, while the S&P 500
was down about 106 points, 3.4%, to trade near 3,024. The Nasdaq Composite
fell 264 points, 2.9%, to trade near 8,7754.

On Wednesday, the Dow advanced 1,173.45 points, or 4.5%, to settle at 27,090.86. The S&P 500 rose 126.75 points, or 4.2%, to end at 3,130.12. The Nasdaq Composite climbed 334 points, or 3.9%, to 9,018.09.

For the year to date, the Dow is now down 8.6%, the S&P 500 has lost about 6.6%, and the Nasdaq is about 2.6% lower.

What’s driving the market?

Markets are fixated on the economic implications of efforts to contain the spread of COVID-19, the infectious disease that reportedly originated in Wuhan, China in December, sickening at least 95,000 people since then.

Worldwide, there are now 95,748 cases of COVID-19 and at least 3,286 deaths, according to the latest figures from the Johns Hopkins Whiting School of Engineering’s Centers for Systems Science and Engineering.

“Clearly some of this morning’s decline is just normal give back from yesterday’s explosive rally, although economic fears are continuing to mount as the number of canceled events, gatherings and conferences continues to rise,” wrote Tom Essaye, president of The Sevens Report, in a morning note.

The Dow has had two 4% or more gains in the last three days. The last time the index had two 4% gains or more in a three trading day span was when the index had back to back gains of over 4% in November 2008, according to Dow Jones Market Data.

“Coronavirus headlines will continue to drive trading, and broadly speaking any reports of U.S. or global economic stimulus will be a tailwind on stocks, while any reports of an acceleration of the spread will obviously be a headwind,” Essaye added.

See: World braces for months of trouble as virus pushes west

That news comes after U.S. lawmakers passed an $8 billion emergency spending package on Thursday to combat the coronavirus, and the International Monetary Fund announced a $50-billion lending programs to help businesses harmed world-wide by the epidemic.

In U.S. economic data, first-time applications for unemployment insurance declined in the most recent week, the Labor Department said Thursday morning. Productivity and unit labor costs in the fourth quarter were both lowered from an initial read. Factory orders declined 0.5% in January, the government said.

Which stocks are in focus?
    Burlington Stores Inc. shares jumped more than 2.3%Thursday after the discount retailer beat profit estimates for its fiscal fourth quarter but offered guidance for the first quarter that lagged behind estimates.

  • iBio Inc.
    shares surged on hopes for a partnership with a Chinese company to develop a coronavirus vaccine.

  • US:BJ
    BJ’s Wholesale Club Holdings Inc. reported Thursday fiscal fourth-quarter profit and revenue that matched expectations, while same-store sales came up a bit shy.Shares jumped more than 5%.

  • US:UAL
    Airline stocks sold off hard Thursday morning after a string of revenue warnings and the collapse of a U.K. air carrier. United Airlines Holdings Inc. slid about 10%, American Airlines Group, Inc. shares were down nearly 12%, and Southwest Airlines Co. shares fell about 4.5%.

  • US:HTZ
    Car-rental companies were even harder hit after an analyst warning on travel disruptions. Hertz Global Holdings Inc.  shares lost more than 14% and Avis Budget Group Inc.  saw shares fall about 13%.

  • US:ZM
    Zoom Video Communications Inc. shares jumped nearly 8% Thursday as analysts cheered rosy fourth-quarter earnings and forecast increased demand for the company’s services, which enable remote working.

  • Dollar Tree Inc.
    shares rose after a Deutsche Bank upgrade.

How are other assets performing?

The benchmark U.S. 10-year Treasury note
ticked down about 7 basis points to yield 0.92%. Bond yields rise as prices fall. The 10-year briefly breached 0.90%, a new low, midday, spooking stock investors.

Gold for April delivery
gained 1.7% to trade at $1,670 an ounce on renewed demand for assets perceived as havens, while
April crude futures traded 1.3% lower to $46.216 a barrel on the New York Mercantile Exchange

The Cboe Volatility Index
roared to 40, up 25%. The so-called VIX rises as stocks fall and is used as a gauge of implied volatility in the stock market. Its historic average is around 19.

The dollar
was 0.5% lower compared with a basket of currency trading partners.

In Europe, stocks were mixed. The FTSE
jumped 1.5%, but the Stoxx Europe
fell 1.4%.

In Asia overnight, the Shanghai Composite Index
gained 2% and Tokyo’s Nikkei 225
rose 1.1%. The Kospi
in Seoul gained 1.3%. China’s CSI 300 Index
rallied 2.2%.

Related: Buy the dip? Here’s how some analysts say investors should play it

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Warren Buffett’s big bet on airlines could have lost nearly $3 billion in 3 weeks

The selloff in airline stocks resulting from the coronavirus outbreak could be costing Warren Buffett nearly $3 billion over the past few weeks.

Buffett’s investment arm Berkshire Hathaway Inc.
, of which he’s chairman and chief executive office, was Delta Air Lines Inc.’s largest shareholder with a stake of 70.91 million shares as of Dec. 31, according to Berkshire’s latest 13F filing with the Securities and Exchange Commission.

Berkshire also owned 42.50 million shares of American Airlines Group Inc., 53.65 million shares of Southwest Airlines Co. and 21.94 million shares of United Airlines Holdings Inc., making him the second-largest shareholder in each of those airlines, according to FactSet.

Since Feb. 12, when the U.S. Global Jets exchange-traded fund
started a 15-session stretch, in which it is on track to fall for a 14th time, that ETF has tumbled 30%. That compares with a 17% drop in the Dow Jones Transportation Average
and the Dow Jones Industrial Average’s
11% selloff over the same time, amid growing fears of the global economic impact of the coronavirus outbreak, which was first detected in China.

Over the same time, shares of American
have lost 14%, Delta
have shed 14%, Southwest
have dropped 13% and United
have given up 27%.

Don’t miss: United, Delta and seven other airlines are waiving flight change fees because of the coronavirus outbreak.

On Thursday, shares of Southwest slumped 3.0% after the company cut its first-quarter unit revenue guidance, while United’s stock dropped 6.6% after the carrier said it was reducing U.S. flights and asking worker to take unpaid leave. Separately, the U.K.’s largest domestic airline Flybe collapsed Thursday, with all flights being grounded.

If Berkshire’s holdings remain the same as of Dec. 31, the value of its investments in those carriers could have declined by a total of about $2.85 billion since Feb. 12.

Keep in mind that Buffett is in it for the long haul, as he started nibbling on airlines during the third quarter of 2016, by buying 21.77 million shares of American and 4.53 million shares of United. He then loaded up on the sector during the following quarter, as filings show he owned 45.54 million shares of American, 60.03 million shares of Delta, 43.20 million shares of Southwest and 28.95 million shares of United, as of the end of 2016.

From the end of 2016 through Feb. 12, 2020, American’s stock had lost 35%, while shares of Delta had gained 21%, Southwest had advanced 17% and United had rallied 13%. Over the same time, the Dow transports had edged up 1.2% and the Dow industrials had run up 34%.

Some Wall Street analysts suggested negative effects of COVID-19 on airlines could be short lived, as sooner-than-expected cuts in seat supply, like those announced by United, could help soften the effects of reduced demand.

“We continue to believe the U.S. airlines under coverage are well positioned to weather demand headwinds and these proactive steps [re: capacity] are likely to help investor sentiment, albeit with headline risk (related to revenue/demand weakness) still elevated over the next few weeks,” Analyst Savanthi Syth wrote in a note to clients.

Meanwhile, Stifel Nicolaus’s Joseph DeNardi wrote: “First, we see the fact that the virus is novel, easily transmissible and likely under-reported (due to insufficient diagnostics) as leading to continued disruptions to domestic demand. Whether these disruptions will be short-term in nature will depend primarily on the asymptomatic nature of the virus.”

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Here’s what Apple suppliers have been saying about the coronavirus epidemic

Skyworks Solutions Inc. became the latest Apple Inc. supplier to warn of negative impacts from the novel coronavirus epidemic Wednesday, joining the smartphone giant itself and a number of other supply-chain partners.

Semiconductor company Skyworks
based in California, lowered its revenue and earnings forecast Wednesday as the company now expects fiscal second-quarter revenue of $760 million to $770 million, below a prior outlook of $800 million to $820 million. The company is also calling for adjusted earnings per share of $1.34 at the midpoint its new revenue range, compared to its earlier projection of $1.46 at the midpoint of the old range.

“Although COVID-19 has caused no significant disruption within Skyworks’ manufacturing operations to date, the current demand environment for our products has been negatively impacted by interruptions in global supply chains,” Chief Executive Liam Griffin said in the release, referring to the disease brought on by the novel coronavirus that originated in Wuhan, China late last year.

Read: What Apple, Microsoft, GE and other U.S. companies are saying about the coronavirus outbreak

The company’s estimated revenue impact from the coronavirus is similar to what fellow Apple
supplier Qorvo Inc.
indicated Tuesday with its own trimmed outlook. The company is now modeling 770 million in fiscal fourth-quarter revenue, down from an earlier forecast of $800 million to $840 million.

“We expect that Skyworks is seeing exactly the same effects,” Raymond James analyst Chris Caso said in a note to clients. He assumes that “slower end demand follows the supply chain disruptions that occurred this quarter.”

Apple itself told investors on Feb. 17 that it didn’t expect to meet its quarterly revenue forecast of $63 billion to $67 billion due to the outbreak. Chief Executive Tim Cook said on Fox Business last week that factories in China are now “in ramp” as the coronavirus situation starts to improve in the country..

Qorvo and Skyworks are hardly the first of Apple’s suppliers to comment on what impacts the coronavirus could have on their financial performance. Drawing from Apple’s annual list of top suppliers, here is a sampling of what others have disclosed in recent weeks.

a maker of sensors and connectors, told investors on Feb. 24 that it didn’t expect to meet its prior forecast “given the uncertainty around the timing of a return to full production in China and the lack of visibility with respect to demand from customers in China.”

Analog Devices Inc.
reported results Feb. 19 and disclosed that it expected a $70 million negative revenue impact from the virus. Speaking earlier this week at a Raymond James conference, Chief Financial Officer Prashanth Mahendra-Rajah declined to talk about business trends in the weeks since the last earnings report, though he said that the company is “comfortable with the guidance that we put out there.”

The chairman of Foxconn Technology Group, which assembles devices for Apple, remarked earlier this week that the company expects its factories to return to their seasonal levels in March if the outbreak doesn’t get worse, according to a Wall Street Journal report. One problem the company had faced was a limited workforce, as some employees were subject to lockdowns and couldn’t make it to work as China attempted to control the spread of the virus.

Executives from circuit maker Maxim Integrated Products Inc.
met with Morgan Stanley analyst Joseph Moore earlier in the week, but the company isn’t adjusting its forecast to account for the coronavirus.

“The company acknowledges increased uncertainty and the potential for disruption,” Moore wrote in a summary of the conversation. “That said, Maxim highlighted that outside of optical and [battery management solutions], it has less exposure to Chinese [original equipment manufacturers] and also has no manufacturing footprint (front end or back end).”

Microchip Technology Inc.
yanked its earnings outlook Monday, citing “very weak demand in Asia, especially in China, driven by the COVID-19 fears, and customers returning to work at a slower pace than anticipated.”

NXP Semiconductors NV
reduced its revenue forecast by $50 million to $150, also on Monday. The company saw the weakest activity around the extended Lunar New Year period but has observed “more normal order levels” in the past two weeks.

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