Coronavirus Unleashes All Pent-Up Reasons For Market Sell-Off

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Posted: Jan 28, 2020 9:22 AM
Coronavirus Unleashes All Pent-Up Reasons For Market Sell-Off

Source: AP Photo/Richard Drew

Although circumstances on Wall Street aren’t as dire as Don Henley’s classic, we have been reminded that things can change in a ‘New York Minute.’ In this case, the emotions of the market have shifted well ahead of underlying fundamentals. While there are no doubt analysts will have to break out their erasers and adjust their assumptions, as things stand at the moment, I don’t think the full year outlook has changed.

In the near term, the coronavirus has unleashed all the pent-up reasons to sell, from valuations to earnings concerns to the Biden juggernaut. This would put a layer of angst in the market leading up to election day if he was the Democrat nominee.  And just like that, the market breadth has completely flipped, as there were more new lows than new highs on the NASDAQ. The down volume dwarfed the up volume on the NYSE, which is one of the reasons the Dow Jones Industrial Average gave up its 2020 gains.

Market Breadth

NYSE

NASDAQ

Advancing

620

765

Declining

2,331

2,482

52 Week High

111

78

52 Week Low

102

96

Advancing

443.6M

730.3M

Declining

3.4B

1.9B

Key Downside Test

After going parabolic, the market is now looking at major indices holding above key technical support levels, including their respective 50-day moving averages. 

  • S&P 500: 3,198
  • Dow Jones: 28,376
  • NASDAQ: 8,881

The market had such a remarkable run that it’s clear there’s room to the downside with the NASDAQ having the most room to its 50-day moving average. However, these levels must hold if buyers are to be swayed.

Today’s Key Earnings

Financial results are important, but it’s the reaction to those results that matter the most. It’s important to keep this in mind, considering the reactions over the last seven quarters. McDonald’s (MCD) and Starbucks (SBUX) shares slipped in the week after the last report. Now, they must contend with the coronavirus situation when offering guidance.

Stock Reactions

MSFT

AAPL

MCD

SBUX

Oct 2019

+5.6%

+5.0%

-9.3%

-1.4%

Jul 2019

+3.1%

-5.6%

-2.6%

+4.9%

Apr 2019

+2.0%

+1.2%

+0.9%

+0.6%

Jan 2019

+0.1%

+12.6%

-3.0%

+6.7%

Oct 2018

+2.7%

-6.1%

+4.0%

+17.3%

Jul 2018

+4.9%

+8.8%

-1.2%

+0.5%

After the Close

After the close on Monday, most companies posting financial results for the quarter beat on the top and bottom lines, but a few offered guidance below Wall Street’s consensus and paid a serious price.

In-line Guidance

Whirlpool (WHR)

The company sold 7.8 million products in the United States, down 3.8%. Higher prices and lower raw material costs powered the bottom line. The guidance was largely in line with the Street.

Poor Guidance

  • PerkinElmer (PKI)

Quarterly guidance: $0.70 consensus $0.84

  • Juniper (JNPR)

Quarterly guidance: $0.27 consensus $0.31

  • F5 Networks (FFIV)

Quarterly guidance: $2.17 consensus $2.44