Stocks swing lower in volatile trading as Dow heads for its worst-ever first quarter

Stocks gyrated between gains and losses on Tuesday, the last day of the first quarter, as investors wrapped up a period of historic market volatility sparked by the coronavirus pandemic.

The Dow Jones Industrial Average traded 44 points lower, or 0.2%. The S&P 500 was down by 0.3%. The Nasdaq Composite gained 0.2%. The was up as much as 152 points earlier in the day. 

Investors digested a slew of news that may be contributing to the volatile swings on Tuesday, along with the monthly rebalancing of portfolios

  • New York Gov. Andrew Cuomo said coronavirus cases in the state jumped by 14% overnight to more than 75,000.
  • Goldman Sachs said that the economy would go through an unprecedented plunge in the second quarter, but that the recovery would then be the fastest in history.
  • U.S. consumer confidence dropped less than expected in March. The Conference Board said Tuesday its consumer confidence index dropped to 120 this month from 132.6 in February, beating a Dow Jones estimate of 110.
  • Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN that he is starting to see “glimmers” that social distancing is helping to lessen the spread of the coronavirus in the U.S.

Tuesday’s moves come a day after the market posted a sharp move higher in the previous session. The Dow jumped nearly 700 points on Monday led by an 8% pop in Johnson & Johnson after it announced a vaccine candidate for the coronavirus. The S&P 500 rallied 3.4%.

Investors embraced a more realistic government approach to contain the pandemic. President Donald Trump extended the timeline for social distancing guidelines to April 30, which many believe will reduce economic damage in the long run. 

“I think the market has established some type of bottom,” Tom Lee, head of research at Fundstrat Global Advisors, said on CNBC’s Markets in Turmoil Special on Monday. “I don’t know if this is October ’08 here; we still have some wood to chop.”

Stocks have managed to rally to end the month despite concerning economic data including last week’s record number of jobless claims and Monday’s worse-than-expected manufacturing reading from the Dallas Fed.

“If we are rallying on bad news, I think that’s a sign that we are probably at a bottom,” Lee said.

Data slated for release Tuesday includes the Conference Board’s consumer confidence index at 10 a.m. The Chicago PMI came in at 47.8 for March, well above a StreetAccount estimate of 39, but still signaled a contraction in business activity. 

The Dow is now up 20% from its coronavirus sell-off low reached on March 23 while the S&P 500 has risen more than 17% from those levels. 

“As we conclude an unforgettable March and 1st Quarter today, the market seemingly has drifted (spiked) to no man’s land,” wrote Frank Cappelleri, executive director at Instinet. He noted that stocks have rallied from their lows last week but are still well below their record highs. But, “for what it’s worth, April has a better track record on average (+1.7% the last two decades, with a 75% win rate). It, too, has tended to do better in the final two weeks.”

Despite the recent comeback, the market is on pace to end the month and quarter with big losses:

  • The Dow is down 12% in March, on pace for its worst month since October 2008.
  • The S&P 500 is down 11% in March, also on pace for its worst month since 2008.
  • The Dow is down 22.1% this quarter, on track for its worst quarter since 1987 and its worst first quarter ever.
  • The S&P 500 is off 19.1% this quarter, on track for its worst quarter since 2008 and its worst first quarter since 1938.

Many on Wall Street are calling for even more selling before the market can hit a bottom. Historically, bear markets are often punctuated by sharp bounces on their way down to a trough. 

“Last week’s double-digit gain for markets was a welcome relief rally, though market bottoms are rarely as clean as this one has been,” said Mark Hackett, Nationwide’s chief of investment research. “Markets will need to reflect more traditional interactions before confidence in a bottom can be reached.”

Investors continued to grapple with the worsening outbreak in the U.S. as the confirmed cases rose to more than 153,200, according to data from Johns Hopkins University. The U.S. has also officially become the country most affected. Trump said Sunday he hopes the country will “be well on our way to recovery” by June 1.

“We anticipate that market volatility will resist until liquidity, credit, and health risks have demonstrably passed,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. “With major policy stimulus now in place in the U.S., we expect grim health and social news to dominate the next couple of weeks.”

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