GLOBAL STOCKS TUMBLE ON CORONAVIRUS SPREAD -- 10-YEAR YIELD FALLS TO NEARLY FOUR-YEAR LOW -- ENERGY, TECH, AND CYCLICALS LEAD THE DECLINE -- SOME SUPPORT LEVELS HAVE BEEN BROKEN -- VIX SURGES TO HIGHEST LEVEL IN A YEAR
GLOBAL STOCKS PLUNGE ON CORONAVIRUS SPREAD... Recent technical warnings that global stocks were vulnerable to more selling became a harsh reality today. And in a big way. Global stocks fell the most in nearly a year. Selling started in Asia and Europe before spreading to the states. And a lot of short-term technical damage was done. Major U.S. stock indexes lost more than -3% in heavy trading. All eleven stock sectors lost ground with the biggest losses in energy (4.7%), technology (-4.1%), and cyclicals (-3.4%). Defensive sectors like utilities saw the smallestlosses. Travel stocks like airlines and cruise lines saw the day's biggest losses along with other stocks more closely tied to China. Economically-sensitive commodities like crude oil and copper fell sharply, whilesafe haven gold rose to another seven-year high. The continued rotation out of stocks and into Treasuries was enough push the 10-Year Treasury yield to the lowest level in nearly four years. And dangerously close to a record low.
10-YEAR TREASURY YIELD FALLS TO FOUR-YEAR LOW... The weekly bars in Chart 1 show the 10-Year Treasury yield ($TNX) falling 9 basis points today to 1.37% which its lowest level since July 2016; and close to record territory. The 30-Year Treasury yield has already fallen to its lowest level in history. Today's drop put the TNX back to previous lows ranging from 1.39% in 2012 to 1.33% formed during 2016. That makes for an important test of those previous support levels. Whether or not those previous lows hold may tell us more about confidence in the global economy. Today's plunge in stocks and riskier assets shows that confidence being shaken.
SHORT-TERM LEVELS BROKEN... Several short-term support levels were broken today; and others are being tested. Chart 2 shows the Dow Industrials losing -1031 points today and closing below its late January low to turn its short-term trend lower. And it did so in very heavy trading. As did the other two major stock indexes. Chart 3 shows the S&P 500 trading below its 5o-day average all day; and threatening its late January low. Technical odds of that support holding don't look very good. Chart 4 shows the Nasdaq Composite Index closing just below its 50-day line; and just above its late January low. Heavy selling in technology stocks, led by semiconductors, helped make the Nasdaq the day's biggest percentage loser. Today's heavy selling suggests that its January low could be severely tested.
VOLATILITY INDEX SURGES TO ONE-YEAR HIGH... Another sign that investors are growing increasingly nervous about the stock uptrend was today's 46% spike in the Volatility (VIX) Index. The daily bars in Chart 5 also show the VIX rising above its August peak to end above the 25 level for the first time since the end of 2018. That upside breakout also suggests that there's probably more stock selling to come.
