Financial markets attempted to claw back on Tuesday after the steepest worldwide selloff in two years as worries over the economic fallout from the coronavirus crisis hit fever pitch. Wall Street futures pared early gains despite reports of a possible vaccine and European markets gave back early gains as the virus spread in Italy. Bets on a Federal Reserve rate cut have risen, and the corporate cost of the crisis mounted as more companies warned of slowing revenue growth. Meanwhile, OPEC insisted it hasn’t run out of options to rebalance oil markets as prices remain under pressure. Here’s what you need to know to start your day.
- Turnaround Tuesday?
U.S. stock futures pointed to a flat open on Wall Street by 7:18 AM ET (1218 GMT), with Dow futures reversing a more than 100 point gain. The Dow shed more than 1,000 points by the close on Monday, its third largest points decline ever amid a global stock selloff triggered by fears over the damage a pandemic would do to the global economy.
The S&P 500 ended down 3.3%, also the worst drop in two years. With Monday’s declines, the S&P 500 and the Dow both wiped out their gains for the year to date.
A Wall Street Journal report on a possible vaccine was cited as helping sentiment, but European markets fell back into the red, surrendering early gains as the virus spread to the south of Italy and Spanish authorities tested hundreds of tourists in a Canary Islands hotel after a case was identified.
- 80,000 people globally hit by virus
The coronavirus outbreak has now affected 80,000 people globally and the death toll in Italy climbed to seven on Monday with 229 cases reported in what is the largest cluster of virus cases in Europe.
China reported a rise in new cases in Hubei province, the epicenter of the outbreak, even though the rest of the country saw a fourth-straight day of declines.
South Korea, which has the most virus cases in Asia outside China, reported 60 new cases on Tuesday, increasing the total number of infected patients there to almost 900.
The WSJ reported that drugmaker Moderna (NASDAQ: MRNA) has shipped the first batch of its rapidly developed coronavirus vaccine to U.S. government researchers to be tested in humans. Shares in the company soared 15.6% to $21.33 in after-hours trading on Monday.
Separately, China is planning to release results from clinical trials of a Gilead Sciences (NASDAQ :GILD) drug in April.
- Fed rate cut bets rise
Futures for the Federal reserve funds rate have risen in recent days and are now pricing in a 50-50 chance of a quarter-point rate cut as soon as April. In all, they imply more than 50 basis points of reductions by year end.
Ten years U.S. Treasury yields reached lows of 1.36% on Tuesday, within touching distance of the record lows of 1.32% set in 2016 in the wake of the Brexit referendum.
Cleveland Fed President Loretta Mester described the outbreak as a “big risk” on Monday.
“At this point, it is difficult to assess the magnitude of the economic effects, but this new source of uncertainty is something I will be carefully monitoring,” she said.
But Mester pushed back against the notion that the Fed would be driven to act in response to jittery financial markets.
“I just caution that you don’t want to over-react to volatility in the markets if you’re a monetary policymaker,” she said.
- Corporate cost of virus crisis mounts
Overnight Mastercard (NYSE: MA) warned that its net revenue in the first quarter will take a hit of between 2% and 3% over its previous forecast if the coronavirus outbreak persists through the quarter.
Meanwhile, United Airlines (NASDAQ: UAL) withdrew its full-year 2020 guidance, citing heightened uncertainty over how the duration and spread the virus to other regions could impact overall air travel demand.
Among U.S. airlines, United is the most at risk for lower passenger traffic from virus fears due to its greater international exposure, CFRA analyst Colin Scarola said in a note to investors.
- OPEC says it still has ideas to rebalance oil markets
The Organization of Petroleum Exporting Countries and allies such as Russia are still working well together and still have options to try to rebalance global CRU crude markets, Saudi Energy Minister Prince Abdulaziz bin Salman said Tuesday.
Oil ministers of OPEC and non-OPEC countries, a group known as OPEC+, will meet next week in Vienna to assess their global cuts and output policy.
“We are communicating with each other at every opportunity,” he said. “The OPEC secretary-general is attending this conference, and we just had a chat. We did not run out of ideas.”
The comments came amid speculation over whether the group will agree to cut oil production further. Oil prices have slumped amid concerns over a global supply glut and worries over the impact of coronavirus on the global demand outlook.
–Reuters contributed to this report
By Noreen Burke