Posted in: Market NewsOpinion
Published:
March 29, 2020 8:47 PM UTC

Will Wuhan Doctor’s Dire Warnings Send Dow Jones Plummeting?

The Dow Jones Industrial Average (DJIA) ended Friday with a 915-point drop. Now, warnings from a doctor in Wuhan present a new threat. How will the markets respond this week?

  • The Dow Jones slumped by 4% on Friday after Trump signed the $2 trillion relief bill.
  • A Wuhan doctor’s warning on asymptomatic cases could add to the fear felt by the U.S. and Europe’s stock markets.
  • With a gloomy macro landscape, researchers say stocks are headed for a deeper pullback.

The Dow Jones Industrial Average (DJIA) ended Friday with a 915-point drop, down 4% in a single session. The fall came swiftly after U.S. President Donald Trump signed the highly anticipated $2 trillion relief package. Now, warnings from a doctor in Wuhan present a new threat to the U.S. stock market.

China Sees Double-Digit Coronavirus Cases as Recovered Patients Test Positive

Patients that previously tested negative for coronavirus and were discharged from hospitals have started to test positive once again.

A Wuhan doctor told NPR he does not understand why Chinese authorities “choose not to count [asymptomatic] cases in the official case count.”

The doctor said:

“I am baffled.”

The U.S. and Europe financial markets could feel more fear as China recorded 54 new coronavirus cases on March 28.

Scientists say that the coronavirus pandemic in the U.S. is still weeks from peaking. April will likely be worse than March.

The Dow Jones Industrial Average (DJIA) begins to pull back after the approval of relief package. | Source: Yahoo Finance

With the $2 trillion relief package in place, there is no significant fiscal boost in the near-term that could provoke a strong reaction from the Dow Jones.

Only a reduction in the number of new coronavirus cases and significant progress in virus containment are likely to lead to a stable Dow Jones recovery.

Not All Dow Jones Dips Are for Buying, Says Market Researcher

According to market researcher Charles Edwards, dips in the Dow Jones are currently highly risky to buy given the macro landscape of the U.S.

With yield curves inverted and 3.3 million jobless claims, the researcher suggested that the worst may be yet to come for the Dow Jones.

Edwards states:

“Not all dips are for buying. Especially when: yield curves inverted; all time high unemployment claims; end of 100 year debt cycle; asset bubble. Perspective: Dow Jones in the 1930s.”

Source: Twitter

Bank of America, Morgan Stanley, and JPMorgan similarly noted that the unemployment rate in the U.S. remains a serious economic problem in the short-term.

Morgan Stanley chief US economist Ellen Zentner said:

“What we’re now focusing on is what the shape of growth will look like on the other side of that as the social distancing measures start to recede.”

The Dow Jones is expected to remain stagnant until a major breakout emerges in coronavirus containment. With this depressing news from China, it could be a while.

This article was edited by Aaron Weaver.

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Joseph Young @iamjosephyoung

Financial analyst based in Seoul, South Korea. Contributing regularly to CCN and Forbes. I have covered the stock market and bitcoin since 2013.

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