Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
Dow drops 280 points, stocks down thanks to coronavirus panic in the U.S. investors pour cash into treasuries and gold. Market analysts predict corporate and personal income fall in the next months. Favipiravir needs tests to cure coronavirus.
Chinese people are fighting the virus in a closed source model and many people keep their concerns regarding the coronavirus spreading. The Dow Jones Industrial Average falls, and experts claim that stagnation is coming.
COVID-19 is not as deadly as some other viruses, but still has a very fast speed of dispersion. Scientists are still not sure what is the exact incubation period for the coronavirus. Also, one man in China reportedly got the illness twice, which means coronavirus can evolve to ignore the natural immunity cells left from the first contagion.
Dow Jones, Stock Profits Fall Thanks to Economy Drop
Because China will stop providing necessary physical and virtual services to the U.S., the market reacts with the overall drop in prices. Fears make investors think that the price for the stocks of some companies is too high. On Friday, Jim Cramer told CNBC:
“The virus is totally underrated. What I think is a little too premature is they all presume that it is going to be solved within a foreseeable time frame. At what point do we say that many, many companies are going to be hurt by the virus, we’re paying too much for stocks.”
The Dow industrial average index had lost 280 points at one moment, closing with a loss of 227,57 points. Since February 4, this was the first time Dow is closing at less than 29,000. The Standard&Poor‘s shows more than a 1.1% drop, and even NASDAQ slides down by 1.8%. NASDAQ claims this is their worst session since January 31.
Stocks are falling too, with Microsoft losing 3%, Facebook, Amazon, Netflix reportedly lost 1.5% each. In China, many of the companies report about horrible statistics that may be waiting for the U.S. soon. For example, the China Passenger Car Association reports about a 92% slide in auto sales during the first 15 days of February. Thanks to coronavirus, Apple manufacturing is stalled, which may result in a shortage of new iPhone models and other stuff.
Supply Chains at Risk, Investors Flee to Treasuries and Gold
The traders have decided to withdraw from stocks and forward their cash piles to Treasuries. A 30 years Treasury yield for bonds hits the lowest position, going below 1.9%. The yields are moving inversely to the movement of prices here. Also, investors started pouring money into gold, which results in its price going up more than 1%.
For gold, it is a significant peak in the last seven years. Many of the traders consider gold as useless metal and an old type of investment. So any price rise is very good for it. Per Frank Rybinski, Chief Market Strategist at Aegon Asset Management:
“This seems like a textbook defensive rotation. You’re starting to see hard-dollar impacts for companies because their supply chains are being disrupted.”
This month, coronavirus already made many of the U.S. companies to start losing profits. Sony and Facebook restricted their staff to attend public conferences until 2021. The analysts of Wall Street have re-calculated their expectations of growth. Instead of a 6% growth that was going to happen in Q1 2020, it will be only a 3% growth. And the final estimations are still under concern.
Per the FactSet, nearly 50% of all the S&P500 companies are citing coronavirus within their quarterly reports. WHO calls the Iran virus spread ‘worrisome’, but John Lynch from LPL Financial thinks that corporations are still making a very good job:
“Lost in those headlines is corporate America’s impressive performance this earnings season. Companies have done an admirable job growing profits considering stiff headwinds.”
Korea Biomedical Review: Favipiravir Not Approved Yet
Several news outlets in Korea wrote that the new virus treatment is approved by the Chinese officials. However, Korea Biomedical Review found that the so-called ‘Favipiravir’ is a drug that was indeed approved by China, but there’s a trick. It works well against influenza, not the coronavirus. While China Daily reports are accurate, some of the outlets have decided to gather clicks and reshaped the news story.
“The approval document by the National Medical Products Administration said the drug manufacturer, Zhejiang Hisun Pharmaceutical Company, has met requirements to produce the generic form of favipiravir but needs to continue unfinished research in pharmacy and clinical pharmacology”
However, worth to note that the new drug is pretty effective against the classic viruses. It kills RNA viruses, such as Corona, Arena, Bunya, and Filo. Doctor Kim Woo-Ju from Korea University’s Infectious Department claims that scientists need to run a few tests on the new treatment before using it against coronavirus. Because of embryotoxicity, the new drug is also very dangerous by itself. That’s why Japanese medics said that they will only use that against Ebola, and avian influenza.
Earlier, Reuters made a report claiming that Chinese doctors already use the new treatment, with some outlets also claiming at least 1425 cured people. Such misleading information came from some Korean news outlets, and the westerners bought it because they have no idea how to deal with hieroglyphs.