What Caused Stocks to Drop (And Recover?)

What’s in Today’s Report:

  • Why Stocks Dropped and Recovered Yesterday
  • Yield Curve Update:  Why is 10’s-2’s At A Multi-Month Lows?

Apologies for the slightly delayed send, it was user error (I typed in the wrong address at 7:00 a.m. this morning).

Futures are modestly lower despite better than expected economic data, as markets digest yesterday’s decline.

Global Manufacturing PMIs were better than expected in Feb as the EU PMI rose to 49.1 vs. (E) 47.5, while the UK PMI increased to 51.9 vs. (E) 49.6 and the solid data is helping to reduce worries about COVID-19’s impact on the global economy.

COVID-19 headlines were slightly negative overnight as cases rose in China, Japan and South Korea and really the spread of the disease in Asia is the focus of the market right now.  Any headlines that imply the spread is accelerating in Asia will hit sentiment.

Today the key number is the February Flash Manufacturing PMI (E: 51.4), and if that beats expectations that will further reduce concern that COVID-19 virus will be a major headwind on U.S. economic growth (and that will be a fundamental positive for stocks).   We also get Existing Home Sales (E: 5.45M) and have four Fed speakers today:  Bostic & Brainard (10:00 a.m. ET), Clarida & Mester (1:30 p.m. ET).