Day Traders Diary

3/12/20

The major averages suffered their worst day since 1987 as the bull market that started after the financial crisis has officially ended. The Dow Jones Industrial Average closed down 2,352 points lower, or 9.99%, at 21,200. The index had its worst drop since the 1987 "Black Monday" market crash, when it collapsed by more than 22%. The S&P 500 plummeted 9.5% to 2,480, joining the Dow in a bear market. The S&P 500 also had its worst day since 1987 as well. The Nasdaq Composite closed 9.4% lower at 7,201.

Trading was halted briefly after the open for 15 minutes as markets hit the mandated "circuit-breaker" threshold used by U.S. exchanges.  Despite the halt, the Dow went on to notch its fifth-worst decline in its history, according to FactSet. Even the worst one-day drop of 2008 financial crisis did not reach this magnitude.

Not much was immune to the financial market plunge. Small-cap benchmark the Russell 2000 index cratered by 11%. Gold fell. Oil plunged. Credit market spreads widened significantly. Even U.S. Treasuries, a reliable safe haven earlier in the sell-off even as the Fed stepped in to provide more liquidity.

In his address, Trump announced travel from Europe will be suspended for 30 days as part of the government's response to the coronavirus outbreak. Trump also said the administration would provide financial relief for workers who are ill, caring for others due to the virus or are quarantined.

These moves were not enough for investors, however, who were looking for a more targeted fiscal response to address the issue slower economic growth stemming from the coronavirus.

Cruise line shares dropped sharply. Royal Caribbean closed 31.8% lower while Carnival and Norwegian Cruise Line slid 15% and 20.7%, respectively. Airline shares such as United, Delta and American all fell more than 21%.

The CBOE Volatility Index, which is commonly referenced as a fear gauge, surged 40.0% to 75.47-- its highest level since the financial crisis -- as investors rushed for more protection against further equity weakness.

Few asset classes were safe today. The S&P 500 sectors lost between 7.4% (health care) and 12.3% (energy). WTI crude fell 4.3%, or $1.43, to $31.57/bbl. Gold futures fell 3.2% to $1589.80/ozt. The 2-yr yield was unchanged at 0.49%, and the 10-yr yield increased three basis points to 0.85% amid selling pressure. The U.S. Dollar Index rose 0.8% to 97.25.