US equities markets slid on Wednesday with both the S&P 500® Index (SP500) and the Dow Jones recording their worst day since 1 April, falling 2.2% and 1.9%, respectively. The market plunged as US earnings season kicks off this week with the big banks reporting weak first-quarter earnings, coupled with the US’ weakest retail sales data reported on Wednesday.

SP500 and Dow Jones recorded their worst day since Apr 1

Both the SP500 and Dow Jones closed for their worst day since 1 April; the SP500 was down 2.2% to close at 2,783.36 points while the Dow Jones plunged 1.9% to settle at 23,504.35 points on Wednesday. The stocks fell sharply as gloomy economic data and weak bank earnings fueled concerns over the coronavirus’ impact on the US economy.

US Big Banks Hit Hard

Bank stocks have plummeted this year as the pandemic put an end to the longest economic expansion in US history. Investors have sold shares in an anticipation that the industry will bear the impact of loan defaults from retail customers to big corporate loans.

Yesterday, the Bank of America, one of the US’ largest banks, closed more than 6% lower as they reported disappointing earnings. Their first quarter profit plunged 45% as the company set aside USD3.6bn for loan-loss reserves as a result of the coronavirus pandemic.

On Tuesday, JP Morgan Chase and Wells Fargo also posted sharp drops in first quarter profits as the banks also set aside a combined USD10bn for a coming flood of loan defaults. At JP Morgan, the hits were partly offset by record quarterly trading revenue (CNBC, 15 Apr).

US retails sales data plunged 9%, the biggest decline since 1992

On Wednesday, the US Commerce Department reported that the US retail sales plunged 8.7% in March, the biggest decline since the government started tracking the series in 1992. The disappointing stats was as a result of business closures to control the spread of the coronavirus outbreak.
 
A business economic professor at Loyola Marymount University was quoted in the CNBC news (Apr 15) as saying, “The economy is almost free fall. We will see the bottom when the coronavirus infection rates stabilize. It’s going to be a pretty deep bottom from which to come up.”
 

 

Source: Macquarie Research - 16 Apr 2020