US stocks tumbled on Thursday as the 10-year treasury tumbled, and the dollar dropped. Volatility continued to grow, weighing on stocks. The only stocks that could outperform are those that will profit when people are working from home. All sectors in the S&P500 index were lower. Led down by financials and cyclicals, consumers staples and utilities were the best performing sectors in a down tape. Airline stocks hit a three-year lows as consumers canceled trips and are cutting back on travel. Cruise and hotel companies also continue to take it on the chin.
The VIX volatility index closed at an all-time high, as investors scrambled to purchase protection against a further market selloff. Crude oil prices dropped more than 2% as concerns over demand offset an OPEC production cut.
Energy Shares Decline Despite OPEC Cut
Crude oil prices dropped, weighing on energy shares demand destruction due to the spread of the coronavirus, offset a larger than expected cut. OPEC has agreed to impose a deeper round of production cuts paving the way for crunch talks with non-OPEC leader Russia, who still has to agree to the plan. The proposed cuts will still need approval from Russia.
Ahead of Friday’s payroll report, the Labor Department reported a solid jobless claims report. Jobless claims slipped 3,000 to 216,000 for the week ended February 29. Expectations were for claims to fall to 215,000. The four-week moving average of initial claims, rose 3,250 to 213,000 last week.
Did the Fed Panic?
In an interview on Thursday on CNBC, Jeffrey Gundlach says he believes the Fed panicked in cutting interest rates earlier this week and that short-term rates could go to zero. When asked if they could go negative, Gundlach said that he did not think so and the experiment with negative rates has been a failure in both Europe and Japan. The current 3-month yield is pricing in another 50-basis points interest rate cuts in the US, which would take the rate down to between 0.50%-0.75%.
This article was originally posted on FX Empire
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