Equities Fall, Risk of Correction Grow, Oil Prices In Reversal

Equities Fall, Risk of Correction Grow, Oil Prices In Reversal

The U.S. Futures Are Down In Early Trading

The U.S. index futures are pointing to a lower open in the Thursday session. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down about -0.15%. Traders are cautious after the S&P 500 hit a new all-time due to the increased risk of a virus-related market correction. China reports the number of confirmed cases has topped 74,500 with 2118 dead on the mainland. South Korea reports that its cases are spiking despite containment efforts across the region.

A number of companies have issued revenue warnings because of the virus impact on global trade. Today’s news includes statements from air-carrier Air France and global shipping giant Maersk. Air France describes the impact as “brutal” while Maersk told its investors volumes and traffic will be significantly lower than expected.

Investment banker Goldman Sachs says the market is underestimating the fallout from the epidemic and I think they are right. At current levels, the S&P is trading nearly 19X forward earnings with consensus estimates in decline. At the current pace of decline, the 1st quarter earnings cycle will most likely result in negative EPS growth for the broad market.