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Worst point drop in history amid coronavirus fears
Stock Market Crash of 1987: On October 22, 1987–known as Black Monday–the DJIA fell by 508 points, or by 22.6%, the largest percentage drop in one day in history:
... It happened that the collapses spread to all stock exchanges, with the FTSE 100 in London closing the day at -26.4%, Madrid at -31%, Sydney at -41.8% and Hong Kong at -45%. Business Square (Italy) was doing relatively well, where the decline was contained at -6.4%.:
It should be a revealing open in 3 hours which should set the tone for the week. The China Feb PMI on Friday was the worst number ever (ever) -- manufacturing was a 35.7, with a 45.1 expected, and services was 29.6, with a 51.4 expected. And this was the official (state-approved, no doubt) number. Oof. I can't imagine US indices won't open down at least a percent or two. The private Caixin manufacturing PMI number (released by Markit) is out at 8:45pm ET, which will likely tell a similar tale.
Kuroda and the BoJ have promised to "provide liquidity" -- RBA also is said to likely cut tomorrow. Shanghai is up almost 3%, and the only thing red on my board is VIX and Yen ... spoos are up 100 points off their lows. .... the Fed is not far behind, and the market is, IMHO, already pricing in a big cut.
For those traders who aren't keen to follow central banks and the like, well .. shame on you. While the past week showed safe haven flows into sovereign debt, we are currently seeing the short end of the curve bid up, precisely for the global cut that is about to happen, IMHO (that is, the front end of the curve is widening).
While the coronavirus can wipe trillions from the global economy, central banks can wave their collective magic wand, create more than what was wiped, and inject that into the global money supply. When central banks are the driver du jour, the market does not respect your chart patterns, "levels," or anything otherwise you think might be important. Central banks have far more power than prime ministers, royal families, presidents, dictators, or any leader.
One person's opinion -- he says the Fed will cut 50-75bps on Wednesday between 7am and 8am. Read the previous minutes of some of those meetings for an interesting insight into their attitude:
The question is, how many people would have to contract CV, or die from it, to counteract a 75bps rate cut and take the market back down? My guess is, a LOT. When it comes to free money, the market can't be bothered with death and calamity, so if it's 75bps, you will want to be buying everything. Easy money is the market's favorite kind of cocaine.
1) there is no global rate cut -- markets likely continue to bleed lower as more cases emerge
2) there is a global, *aggressive* rate cut -- markets rally, hard, and likely back to ATHs within 1-3 weeks, almost as quickly as it came down
3) there is a global rate cut -- markets rally, but not substantially, and virus fears continue to weigh, keeping the market subdued
4) the virus explodes, bucking current trends, and no amount of accommodation can keep the fall from continuing
5) on monday/tuesday, the market dips to new lows, cleaning out the friday buyers, and then we see the aforementioned rally
These are very rough and not too specific as I don't have time to flesh this out at the moment, but those are some scenarios.
