- The U.S. stock market is set to drop by 4% as the World Health Organization issues an airborne warning for coronavirus.
- New York already accounts for 5% of all COVID-19 cases, and sentiment around containment is declining.
- A $2 trillion relief package has hit a roadblock as stocks see a tough week ahead.
The U.S. stock market is set to drop by around 4% on the day’s open, as Dow futures indicate a 720-point drop. It comes after the World Health Organization (WHO)’s unexpectedly warning the coronavirus has the ability to survive in the air.
The precautions about the survivability of coronavirus are being issued as the virus outbreak rapidly sweeps across several highly-infected states, including New York and California.
Coronavirus is spreading faster than expected in the U.S.
According to data from worldometer, the number of total coronavirus cases in the U.S. has exceeded 35,000. That is more than seven times the cases in South Korea, which was the most infected country outside of China merely a month ago.
The Centers for Disease Control (CDC) said on March 20 that total coronavirus cases in the U.S. are hovering at 15,000. Within less than three days, that number has more than doubled.
The swift expansion of the virus outbreak prompted New York Governor Andrew Cuomo to controversially state that 80% of individuals could be infected in the state.
Former Stanford professor and founder of a major biotech company Balaji Srinivasan described Cuomo’s statement as an “American leader surrendering to the virus.”
As the coronavirus outbreak continues to worsen in the U.S., the stock market is increasingly showing signs of uncertainty and lack of confidence.
The Dow Jones has already fallen to the low 19,000-point region, and there is little support at a technical level from the current area to 18,300 points.
The U.S. stock market remains vulnerable in the short-term to a steeper correction as the $2 trillion relief package set forth by the Treasury hits a roadblock with House Speaker Nancy Pelosi’s disapproval.
With the WHO’s warning that coronavirus can stay in the air prolonged periods of time and the declining sentiment in regarding the containment of the virus in the U.S., the stock market faces another tough week ahead.
Even KOPSI, the stock market index of South Korea, fell by more than 5% on the day despite a flattening of the curve of coronavirus cases in the country.
Monetary policies aren’t working and won’t boost stock market
The Federal Reserve is not holding back on introducing as many stimuli as possible to recover the U.S. stock market.
The Fed has said that it will lend $1 trillion to the nation’s banks every day until the end of March, 4
Steven Friedman, a former economist at the New York Fed, said the Fed will not hesitate in buying treasuries and mortgage-backed securities in the near-future, as the stock market and the economy fall deeper into recession.
The problem is that these fiscal policies, even with a zero interest rate in place, is not slowing down the downtrend of the stock market.
Strategists do not anticipate the severe correction of the stock market to be saved by monetary policies, as some have argued that only a decline in the number of coronavirus cases would revive appetite for high-risk assets like stocks.