The Dramatic Rise of the Coronavirus in the U.S. has Significantly Dragged Down Markets

The effects of coronavirus on business and consumer activity has completely disrupted financial markets in the U.S. During March, the S&P 500 and Dow Jones Industrial Average indices each fell by at least 25% at one point, while the Nasdaq fell by roughly 20% at its lowest point. The Russell 2000, a small-cap index measuring market values of the smallest 2,000 U.S. stocks, lost nearly one-third of its value, representing the disproportionate toll coronavirus will have on smaller U.S. businesses. The stock market had begun to make a recovery at the end of the month, after Congress approved a $2-trillion stimulus package to bolster struggling consumers and businesses.

---

• On March 9, Italian Prime Minister Giuseppe Conte announces that all of Italy is sent into lockdown, as the global death toll reached 3,800 and U.S. equities neared bear-market territory. A bear market is defined by an index trading at least 20% below its 52-week high. Moreover, during the day, oil prices experienced their largest single-day drop since the Gulf War, with West Texas Intermediate crude closing 25% lower than the Friday before the weekend. In total, this news sent the S&P 500 and Russell 2000 down 7.60% and 9.37%, respectively.
• On Thursday, March 12, The S&P 500, Nasdaq, and Russell 2000 indices declined by 9.51%, 9.43%, and 11.18%, respectively. In fact, this was the worst day for the Dow Jones and S&P 500 since the “Black Monday” crash of October 19, 1987. Moreover, the Fed had announced on March 12 to pump $1.5 trillion into the financial system, which appeared to have a muted effect on investor sentiment. Also, Republican lawmakers refused to back the coronavirus aid bill on March 12. By March 14, the Dow Jones, S&P 500, Nasdaq, and Russell 2000 fell by 12.93%, 11.98%, 12.32%, and 14.27%, respectively, despite President Trump’s announcement the day before declaring a national emergency to free up $50 billion in federal aid.
• On March 24, U.S. equities experienced a rebound, with the Dow Jones and Russell 2000 indices gaining 11.37% and 9.39%, respectively. It was announced that day Democrats and Republicans were nearing a $2-trillion stimulus bill. Furthermore, the House of Representatives proposed a bill to grant airlines and contractors a $40-billion bailout. Separately, the Purchasing Managers Index reported by IHS Markit recorded the sharpest downturns in output and new orders for March since 2009.

---

COVID-19’s Impact on Equity Markets has Reduced Investor Confidence in IPO Fundraising

​The coronavirus’s negative impact on U.S. equity markets has put the brakes on the IPOs. Last month U.S. markets saw only five initial offerings worth $2.4 billion, three of which were in the healthcare industry. This represents a 75% reduction in IPOs and a 50% decline in funds raised since February. Year to date, fundraising is still up 26.7% compared with 2019, despite the total number of IPOs falling 7.5%. With the rise of the coronavirus and its impact on financial markets, U.S. IPOs in 2020 can be expected to underperform compared to recent years.