Stocks took another major hit Thursday but clawed back some losses in crazy trading as a big investment bank predicted profit growth would be all but wiped out this year by the coronavirus and a report indicated the International Monetary Fund may downgrade its forecast for global growth.
Goldman Sachs chief U.S. equity strategist said in a note to clients that U.S. companies will generate no earnings growth in 2020. He cited the severe downturn in Chinese economic activity, resulting in lower demand for U.S. exports, disruptions to the supply chains for many U.S. firms, a slowdown in U.S. economic activity and elevated business uncertainty.
Separately, an IMF spokesman told Reuters the virus “is clearly going to have an impact on global growth.” They organization meets in April to discuss forecasts.
The Dow Jones Industrial Average is down 235 points in early afternoon, well off its lows for the day. It crashed by 900 points in early trade, igniting a panic. The roller coaster comes after a massive point loss Monday and Tuesday – followed by an attempt at a rally on Wednesday – as the virus began to spread internationally in Italy and Europe, South Korea and Iran and one case in Brazil. Japan said today that all schools in the country will be closed starting Monday until the end of the school year at the end of March.
More than 80,000 people have been infected in over 40 countries with more than 2,800 deaths – most in China’s Hubei Province.
On Wednesday, the U.S. reported its first infection in someone, in rural California, who had not traveled abroad or come in contact with anyone who did. U.S. health officials called a spread of the virus in the U.S. inevitable.
At a press conference Wednesday, President Trump contradicted that, saying did he not think a spread was inevitable. He blamed the market’s woes on the media for being alarmist and on the Democratic pool of candidates at the previous night’s debate for spooking investors.
On a bright note Thursday, Starbucks announced it has reopened most of its China stores as the rate of new infections there seems to be slowing.
Media and entertainment stocks gyrated with the market. Disney, a major Dow component, was off 0.41%, well off its lows earlier in the day. Apple was down 3% and Google 1.8%. Discovery was taking a beating, lower by 5.2% after reporting solid quarterly earnings early in the day. Lionsgate was down 4.9%.
Deadline reported yesterday that the closure of theaters in China is approaching a loss of $2B to the global box office and the spike in South Korea and Italy are very worrisome as what looked in late January as a possibly short-term, confined issue has now taken on enormous proportions the overall impact on ticket sales impact potentially as high as $4B worldwide by the end of March.