Many investors are struggling to determine which direction the stock market will take following the steep drop on February 24, 2020, which became the third largest drop in the history of the Dow.
While yesterday’s market decline ranks among the highest point losses on record, the pullback was actually not very steep compared to the total market. Because the Dow 30 index rose dramatically to record highs and approached the 30,000 mark the day before yesterday, the recent one-day stock market drop of 3.56% is not at an alarming level.
While yesterday’s decline may not have been enough to set records, any significant pullback can have dramatic long-term effects on individual investment portfolios. Even investors who work with very long investment horizons should definitely pay attention to the movement of the stock market. A bad decision following the current decline in the stock market that results in a loss of a few percentage points may not seem like much. However, missing the cumulative effect by one or two points can reduce the value of a portfolio by thousands or tens of thousands of dollars over an extended period.
Therefore, investors should try to identify potential triggers for the current pullback and try to overcome any potential slowdown in the near term. Several countries have been battling the coronavirus, or COVID-19, for several months. Still, the stock markets – especially in the United States – seemed immune to the negative effects of the epidemic. The most likely reason for the stock market’s resilience was the perception that, although it was a serious problem originally in China, the virus had not spread in significant volume to the rest of the world. world.
However, a recent announcement of substantial increases in confirmed infections in Italy and Iran has raised fears of a possible larger global epidemic. In addition, the increased frequency of the term “global pandemic” in official reports and press articles has heightened fears and uncertainty about the direction of stock markets in the short and medium term.
Barring a true global pandemic, the global economy should be able to rebound over the long term on solid fundamentals, at least in the United States. Despite the current decline, the US stock market is currently considerably stronger than many markets around the world. Therefore, with very limited investment options in their local markets, a significant portion of global investment funds flee to the relative safety of US markets.
After falling more than 1000 points yesterday, the Dow 30 index started trading today with a gain of more than 100 points. This initial gain should not have surprised anyone. After yesterday’s sharp decline, bargain-hunters looked for bargains early in the session, which pushed markets higher.
However, after the initial rise, the stock market changed direction and resumed yesterday’s downtrend. As of this writing at 2pm on February 25, the Dow 30 is trading nearly 800 points below its level since trading began this morning. In addition, all components of the Dow 30 continued their downtrend from yesterday and continued to decline today. After posting the biggest drop among the components of the Dow 30, 7.8% yesterday, UnitedHealth Group Inc. (NYSE: UNH) is already down 4.6% today. With only the second-highest yesterday’s drop of 5%, American Express (NYSE: AXP) leads the decline with a drop of more than 6% so far today.
The best performing Dow 30 are currently McDonald’s Corporation (NYSE: MCD) and Verizon Communications Inc. (NYSE: VZ). These two companies are down around 2% each in the past two days combined. Although still declining, these two stocks have yet to give their shareholders cause for major concern.
All but a handful of S&P 500 stocks were down yesterday. Unsurprisingly, three of the four S&P 500 stocks that posted the largest drops yesterday were cruise line stocks. The Carnival Corporation (NYSE: CCL) fell 9.4%, Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) was down 9.3% and Royal Caribbean Cruises Ltd. (NYSE: RCL) was down 9%. The only offline title to cruise in the top four was the Centene Corporation (NYSE: CNC) with a 9.3% drop. The Centene Corporation provides services to government funded health care programs, such as Medicaid.
Until 2 p.m. on February 25, those four stocks added between 5% and 7% to their losses of 9% or more yesterday. Some of the biggest losers on the NASDAQ stock market were American Airlines Group Inc. (NASDAQ: AAL) with an 8.5% drop, Advanced Micro Devices Inc. (NASDAQ: AMD) with a 7.8% drop and Tesla, Inc. (NASDAQ: TSLA), which fell 7.5%. However, among the overall carnage, a few stocks are trending upward.
After trading ended Monday night, Moderna, Inc. (NASDAQ: MRNA) announced the shipment of its experimental COVID-19 vaccine to the National Institutes of Health for human trials. The company’s share price is currently more than 30% higher when it opened this morning.
Another biotechnology company that is doing well today is Iovance Biotherapeutics, Inc. (NASDAQ: IOVA). The company’s stock price is up over 27% in today’s trading. Among the largest pharmaceutical companies, despite a market cap of nearly $ 50 billion, Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) has gained 5% so far today. This gain is more than six times the company’s 0.7% gain in the previous 12 months and almost a third of the 17.8% gain in the previous three years.
These three pharmaceutical companies above are just a few of the stocks that are generating gains in a declining stock market. Regardless of the general direction of the stock market, there are always a few stocks that will go against the grain and generate gains against the downtrend. Therefore, investors need to do detailed market analysis and due diligence to identify those stocks that can at least avoid losses or even generate gains if the markets fall.
Ned Piplovic is Associate Content Editor for the Eagle Financial Publications website. He graduated from Columbia University with a BA in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.