- The Dow Jones will have to deal with a slew of terrible coronavirus headlines when it opens on Monday.
- Worrying restaurant data suggests consumer demand may have been cratering even before the European ban took place.
- Weekend index spreads are hinting the stock market crash could be set to continue next week.
It has been a terrible week for the Dow Jones, even as an enormous rally on Friday could only negate the losses from Thursday alone.
As the coronavirus spread gathers pace around the world, it is not just the United States that is banning travel and the impacts of this on the stock market will be substantial.
Dow Jones Faces Uncertain Future After Coronavirus Forces Global Travel Bans
U.S. Vice President Mike Pence announced over the weekend that the United States would be extending its European travel ban to both the U.K. and Ireland for 30 days. While this was casually thrown into his press conference, this is yet another terrible headline for the Dow.
The United Kingdom is the 6th largest economy in the world, with London and New York the main inter-connected hubs of the world’s financial services. Ireland is also a significant destination as a tax haven for U.S. companies.
Even before these countries were added, the Eurozone is the second-largest economic area in the world, and the financial impact is going to be huge. This is in addition to the China travel bank that Trump imposed earlier on in the coronavirus timeline.
Around the world, Saudi Arabia is grounding airlines, while Norway is closing all airports and seaports. These are just a handful of a multitude of examples globally.
In 2018, global tourism added $8.8 trillion to the global economy and 319 million jobs. Tourism has now all but dried up and the trickle-down effects on the economy, and thus, the stock market, are already becoming clear.
Major urban centers in the United States are seeing a collapse in restaurant demand already, and this was before the travel ban with Europe was implemented Friday evening. In New York City, table bookings were down an astonishing 63% on Friday.
This is in addition to N.Y.’s Governor Cuomo closing Broadway, and the shuttering of major sporting events around the country (and the world) to stem the spread of COVID-19.
Apple Store Closures Another Problem For The Dow
An additional problem for the Dow Jones that emerged on Friday was its most heavily weighted stock Apple (NASDAQ: AAPL) is facing the closing of all of its stores globally (outside of China), as the tech giant made the following announcement,
As rates of new infections continue to grow in other places, we’re taking additional steps to protect our team members and customers.
We will be closing all of our retail stores outside of Greater China until March 27.
Another worry for the stock market is that Trump’s claim Google was making a national-scale website to help coordinate coronavirus testing, turned out to be overly optimistic.
Weekend Spreads Hint Stock Market Crash Resuming
Weekend spreads are suggesting that the stock-market crash looks set to resume next week. Though this is not always a reliable indicator of the opening price for Dow futures on Sunday, lately, they have been spot on.
Aside from the travel bans, there was terrible news out of Italy as another 3500 coronavirus cases and 1400 more deaths were announced. In the United States’ cases are now approaching 2500.
The Dow might have rallied on Friday, but it still appears that investors could be underestimating the impact of what is essentially de-globalization around the world.
Despite this, economists at J.P. Morgan still anticipate a quick recovery when the storm passes, stating:
We expect the virus outbreak to weigh heavily on activity over February, March, and April. Although the size of this disruption is expected to be large, it is not anticipated to last long. The fading of the outbreak should promote normalization into midyear.
While this is good news for the Dow Jones longer term if true, it does not rule out another leg down in 2020’s astonishing stock market crash.
This article was edited by Samburaj Das.
Last modified: March 15, 2020 1:58 PM UTC