Fears of Coronavirus-Induced Slowdown Leave Impact on US Stock Market

​After starting February with strong gains in the 4-6% range for the major US indices, the market collapsed from record highs and into correction territory within the last six trading days of the month. The market sustained gains during the first half of the month as government and economic officials around the globe seemed to be taking appropriate action to insulate economies from the effects of the novel coronavirus outbreak. However, by the last two weeks of February, investors were spooked by weak economic data domestically and abroad, stoking fears of a global economic slowdown. 

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• On February 4, 2020, the Dow, S&P 500, and Russell 2000 indices each climbed roughly 1.5%, while the Nasdaq gained 2.1%, and the CBOE Volatility Index fell 10.7% following news of the Chinese government rolling out a series of stimulus packages to ease the impact of the coronavirus outbreak in the country. The People’s Bank of China was expected to lower its benchmark lending rate while Federal and local governments were proposing fiscal stimulus through government spending and infrastructure projects. The outbreak originated in China’s Wuhan province around the turn of the new year.
• By February 19, the US market had extended its gains to record highs with the Dow, S&P 500, Nasdaq, and Russell 2000 gaining 0.47%, 0.4%, 0.87%, and 0.54%, respectively. The Federal Reserve in the US opted to leave the federal funds rate unchanged at a range of 1.50-1.75%, citing its optimistic view of the US economy and that it appeared stronger than what was thought at the end of January. However, the central bank did express concerns regarding the impact of the global coronavirus outbreak and tensions in the Middle East.
• US equities closed out February on a seven-day decline. At the start of the correction, on February 21, the Federal Reserve of Philadelphia noted that its Manufacturing Index fell from 17 in January to -4.1 in February. Growth in durable goods orders in December came in at 1.2%, or 0.8% below expectations. By Thursday, February 27, the Dow, Nasdaq, and S&P 500 had fallen 11.13%, 10.55%, and 10.8% since the Monday of that week, and the Labor Department reported unemployment benefit claims rose 8,000 for week of February 22.

The IPO Market in the US Remained at Low Activity Levels During January

​US IPO activity increased in February, with 18 deals for a total of $4.6 billion in capital raised, a 65% and 67% increase, respectively, over January. However, 18 of the 20 IPOs this month came before February 21, when the US stock market began declining. The largest IPO of the month was a $1.6 billion fundraising by PPD, Inc., a drug development laboratory and contract research organization, on February 6, 2020.