Stock market showing weakness after four months of uninterrupted run: is it correction or temporary fear on Coronavirus

in hive-167922 •  2 months ago 

Stock market is going south for last two days. Moreover, index futures predicts that in Monday, the market can have more than 1% correction. Friday (01/24/2020) was close to 1% correction which was the biggest correction since October, 2019.

Wuhun Coronavirus confirmed cases has crossed over 2700 and death toll is 80. It looks like confirmed cases to reach peak in next two weeks as containment procedure kicks in and than new confirmed cases should go down.

However, the good news is that recovery rate indicates that infected people can recover from infection own their own, and antiviral medicine (HIV approved medicine Lopinavir/Ritonavir) also helps the patients recover quickly.

The bad news is that there are still thousands of unreported or untested cases. The asymptomatic coronavirus carrier can infect others when the infected person has not shown any symptom yet. US already has five confirmed cases.

coronavirus.png

Source: Wikipedia

The confirmed cases are increasing exponentially.

The market is uncertain about the possible outcome. If it reaches at epidemic stage in China, the second largest economy in the world, then it is a very bad news for the market. Therefore, the overvalued market is panicking about the worst outcome which is very unlikely.

Due the advances in Science and experience from SARS and MERS outbreak, World is more than prepared for such pandemic. This Coronavirus will be a small blip in the history.

Moreover, yearly 20K+ people die in US alone each year due to common flu and influenza. Luckily, this coronavirus has lower death rate than SARS and MERS. China and HK is just overcautious in closing parks, theaters and has banned large public gatherings. All wildlife trades has been banned for indefinite time in China.

Shanghai and Hong Kong Disney parks are announced close for indefinitely. As a result Dow Jones powerhouse stock Disney ($DIS) suffered more than 3% though they are small portion of Disney's revenue.

futures_indexes.png

It looks like for next two weeks market will be jittery until Coronavirus is contained and cases are getting down.

Earning season has already begun. It is again mixed bag such as American Express ($AXP) has a blowout ER while Discovery Financial (DFS) has fall down 11% due to lower earning guidance. Netflix ($NFLX) has beaten all parameters except US subscriber growth. Its shared fell 5% on that day. However, it recovered 9% in next two days.

Though Comcast beat earning report, but it lost subscribers for its streaming service, it has lost 4% too.

DIS's earning report is due on 4th February. In 2019, Disney released seven films that topped $1 billion in global box office revenue and launched Disney Plus streaming service to compete with Netflix and Amazon Prime. It is wildly speculated that it will beat ER with strong margin. However, the stock has beaten due to coronavirus. Almost all the gain from last earning report is almost vanished.

Overall, earning season will be mixed but bull market may take some breath in February. But it may resume until the election cycle when final democratic presidential nominee will be clear. Market then can panic at poll results since Democratic candidate may lead in polls most of the time though whoever win the election in November. Therefore, this bull market may continue till June unless FED stop pumping the REPO market or hike interest rate which are very unlikely.

Disclaimer: This opinion is not a financial advice, it my personal perspective and opinion. Please seek professionals for financial decisions. This opinion is only for educational purpose.

Image sources: Most images are open sourced (e.g. Pixabay, Wikimedia etc.) with Creative common license. Some images are used with due courtesy to respected owners.

Thanks for reading.
@dtrade
Cryptominer , occasional trader and tech blogger since 2013

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I believe the coronovirus problem is very very exaggerated. Under the pretext of a coranovirus, China is mobilizing the army and other services to cut citizens ’rights in many ways!
300-500 million people fall ill with the flu in the world - 500-600 thousand die every year!
During the month, 80 people died from coronovirus.
Be smarter - look deeper
World backstage rules the ball!

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