On Thursday, all the major indexes tumbled into correction territory.

Photo: johannes eisele/Agence France-Presse/Getty Images

Any expectation that the coronavirus epidemic would bypass the U.S. stock market disappeared this week as stocks careened. The Dow Jones Industrial Average fell more than 1,000 points on Monday, and then fell nearly 1,200 points on Thursday as all the major indexes tumbled into correction territory. The Dow’s six-session losing streak is its worst since November 2008. Meanwhile, haven assets like bonds and gold continue to see money piling in, with the yield on the benchmark 10-year note setting a record low.

Here’s a look at this week’s big winners and losers.

WINNER: Bond Bulls

When the stock market and the bond market are both rallying, it is usually a sign that somebody is working off the wrong narrative. Either stock jockeys are too optimistic, or bond bulls are too pessimistic.

Then a week like this one happens. While stocks dropped sharply, government-bond yields tumbled to new lows. For bond bulls who have endured the jibes of the buy-risk crowd, it was a moment to vaunt.

“Today will go down as the greatest day in my firm’s history,” said JC Parets, who runs research firm All Star Charts, on Monday. It wasn’t just the gains in the bond market, he said. At the end of January, Mr. Parets warned his several thousand clients to get out of stocks, completely, and buy bonds. That anti-risk call got him a lot of grief, he said.

A registered chart technician, he says he saw more problems for equities than the coronavirus alone. There was rampant buying of call options, meaning speculators were betting on the market rising, along with wild trading of stocks like Tesla Inc. Copper fell and gold rose. Regional banks, which generally perform worse in a low-rate environment, rolled over, while REITs, which generally perform well in the same environment, rallied. All of it, he said, pointed in one direction: Rates were going lower. And so, he felt, were stocks.

Stock selloffs are usually sharp and short, compared with uptrends. The question now is, how short? Mr. Parets took his victory lap, but says he doesn’t see this week as the end of the race. “I haven’t taken any profits, and I’m not telling my clients to,” he said. “I’m not seeing any evidence that this is it.”

LOSER: The Fed Put

Whether it is the coronavirus epidemic, the U.S.-China trade war or recession fears, there has been one consistent rallying point for U.S. stocks: the “Fed put,” the idea that the Federal Reserve will keep rates low to boost the stock market.

To be clear, the Fed itself has never endorsed this notion, but it isn’t an outlandish conclusion. The Fed’s real job, its original job, is to ensure economic stability. That in turn reliably results in a good environment for buying stocks.

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The market’s faith in the Fed’s abilities might be misplaced, though. Rate cuts can blunt the economic winds, but they can’t stop them completely. Rate cuts, for instance, didn’t prevent the last two recessions. They are not going to stop the next one, either, or make the coronavirus go away.

“The Fed’s not going to be able to do anything against the virus,” said Peter Boockvar, the chief investment officer at Bleakley Advisory Group. “It’s not a vaccine.”

More worrying, the Fed has less firepower now to combat a downturn than it did in the past. The Fed’s only direct influence in the market is through its fed-funds rate. When the Fed wants to heat up or slow down the market, it adjusts its target rate (currently 1.50% to 1.75%). The current effective rate is about 1.58%.

Normally that works. But the 10-year Treasury note’s yield—a record low of 1.296%—is below the fed-funds rate. The 30-year Treasury bond yield is 1.782%. How much cheaper can money get? How much more stimulus can the central bank realistically provide?

“The Fed will attempt to establish a ‘put,’” Mr. Boockvar said, “but it may be worthless.”

NEXT WEEK: Jobs

After this week’s selloff, it is an all-bets-are-off market. But that doesn’t mean the fundamentals don’t matter anymore. Next Friday brings the most important data point of the month: the nonfarm payrolls report.

The January report was surprisingly strong, with nonfarm payrolls rising 225,000. That was above the 2019 average of about 175,000 a month. For a jittery market, another strong number would be a welcome salve. A weak number will only exacerbate the market’s fears.

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Write to Paul Vigna at paul.vigna@wsj.com

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