Another Wild Day On Wall Street: Stocks Fall As Investors Await Economic Response To Coronavirus

Topline: The stock market is set to fall sharply again on Wednesday, paring back gains from the previous session as nervous investors await more details on the Trump administration’s possible financial stimulus package to help mitigate the economic impact from the coronavirus outbreak.

• The Dow Jones Industrial Average is set to drop almost 700 points, or nearly 2.9%, in Wednesday’s open, while the S&P 500 is down 3% and the Nasdaq by 2.6%.
• That followed a rally in Tuesday’s session, as the major indexes bounced back and rose around 5% after Monday’s historic sell-off—when the Dow and S&P fell almost 8%, for their worst day since 2008.
• Following his meeting with Republican lawmakers yesterday, President Trump floated the idea of a 0% payroll tax rate that would last through 2020 according to CNBC, as well as promising federal aid to U.S. oil companies hit by the price war and travel companies hit by coronavirus cancellations.
• As investors worry about a lack of specific details and an unclear timeline for the government’s economic response to coronavirus, Trump plans to meet with Wall Street executives on Wednesday to discuss the “major” stimulus measures he promised.
• Wall Street is also now expecting the Federal Reserve to cut interest rates for a second time this month: Fed futures show that the benchmark rate is expected to fall 75 basis points to a range of 0.25% to 0.5% when the central bank meets next week, according to CME date.
• Oil prices fell by 4% on Wednesday—after rallying 10% yesterday and falling 25% on Monday, amid the continuing price war between Saudi Arabia and Russia which is likely to put added pressure on U.S. oil and natural gas companies.
• Travel stocks were again hard hit by coronavirus-related economic fallout: Airlines like American, Delta and United all fell more than 4% in early trading, while cruise operators like Carnival and Norwegian Cruise Line fell 7% and 6%, respectively.

Big number: Coronavirus fears continue to roil the market, as there are now more than 1,000 reported cases in the U.S. and 29 deaths, according to data from Johns Hopkins University. Worldwide cases now amount to almost 120,000 infected and more than 4,200 dead.

What to watch for: Goldman Sachs’s top U.S. equity strategist, David Kostin, said in a note on Wednesday that the current bull market—the longest in history—will soon meet its demise. He predicts a “collapse” in second- and third-quarter profits, with stocks dropping another 15% from their current levels—adding to the market’s 14% loss over the last month.

Crucial quote: “The wild volatility in financial markets continues this morning as the S&P 500 is on pace to give up most of yesterday’s gains right at the open,” Bespoke Investment Group said in a note. “Where we go from there is anybody’s guess… volatility isn’t going anywhere in the short-term as headlines drive stocks violently in both directions.”

Chief critic: “The U.S. isn’t going to unleash a massive fiscal stimulus (despite all the suggestive headlines), as was made clear when Congress failed to endorse a payroll tax cut and Trump didn’t even appear at the press conference intended to announce an economic response plan,” writes Vital Knowledge founder Adam Crisafulli on Wednesday. He reiterated that “fiscal policy won’t rescue this market.”

Tangent: Beverage giant PepsiCo said on Wednesday that it had agreed to buy Rockstar Energy, a maker of energy drinks, for $3.85 billion. The deal is expected to close in the first half of 2020, pending regulatory approval.