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Partners for Strategic Transactions

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

4/3/2020

 
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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.
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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.
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​Skyline Advisors is a division of Ideation Ventures, Inc. Services involving securities are offered through M&A Securities Group, Inc.4151 N Mulberry Drive Suite 252, Kansas City, MO, 64116  (“MAS") . Services involving real estate brokerage are offered through Berkshire Hathaway HomeServices Ambassador Real Estate ("BHHS"). Skyline, MAS, and BHHS are separate entities. 
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