Dow futures rose more than 100 points late Sunday, erasing earlier losses, in a sign more wild swings in markets are likely this week amid reports the coronavirus is spreading in the U.S. and globally.
The broader Standard & Poor’s 500 stock index futures were up 0.2%.
The Dow was down as much as 500 points earlier in the day. Investors are reacting to the spread of the outbreak but also trying to assess if last week’s historic sell-off may have overstated the epidemic’s effects on the economy and earnings.
“With global markets historically oversold, a big bounce could happen if we can get any type of good news,” said Ryan Detrick, senior market strategist at LPL Ffinancial.
Last week, the Dow Jones industrial average tumbled more than 3,500 points, or 12%, its worst week since the 2008 financial crisis. The S&P 500 index slid 11.5%.
In the U.S., officials have identified a handful of cases through community transmission, or a source not directly linked to known cases. That means the disease could spread far more rapidly than the nation’s 72 confirmed cases indicate, taking a bigger toll on commerce and the economy. The first death in the U.S. was announced Saturday. And the Trump administration broadened its travel restrictions for Americans over the weekend.
Meanwhile, the number of cases surged in Italy and continued to climb in countries such as Iran, Iraq and South Korea. There have been more than 88,000 coronavirus cases worldwide, mostly in China, and nearly 3,000 deaths.
A report Friday that manufacturing activity in China plunged to an all-time low in February underscored the virus’s widening impact on that nation’s economy.
“The big question now is how quickly the rest of the globe begins to slow,” Detrick says.
The spate of worrisome developments over the weekend may offset the positive market effects from Federal Reserve Chair Jerome Powell’s signal Friday that the central bank will likely cut interest rates at its March 18 meeting.
“We will use our tools and act as appropriate to support the economy,” Powell said in a rare statement that served to pare Friday’s Dow losses by about 600 points. Fed fund futures markets are pricing in a 100% chance the Fed will cut its key rate by up to half a percentage point this month.
The virus is expected to disrupt the American economy and lower corporate earnings in part by restricting foreign tourism and disrupting the delivery of parts for auto and other manufacturers, as well as toys, clothing and other retail products. It’s also prompting businesses to cancel conferences.
Last week’s market sell-off featured the Dow’s nearly 1,200 point plunge on Thursday – its biggest one-day point drop ever. The blue-chip index is now in a correction – a decline of at least 10% from its most recent high – for the first time since December 2018.