The Coronavirus Outbreak's Impact On Global Stocks, Commodities, ETFs

Global markets have suffered their worst slump since the 2008 financial crisis as fear grows over the impact of the coronavirus outbreak. 

As the spread of the COVID-19 virus continues to evolve, many travelers have been reconsidering their plans and the best way to prepare and protect themselves from exposure to the virus.

In reaction to this, many airline, casino and hotel stocks have taken a huge hit.

With many people staying home, either out of self-imposed quarantines or because of government requirements, sales at movie theaters, retail stores and restaurants are poised to suffer.

Casino Operators

In Macau, the Chinese territory and the world’s biggest gambling hub, casino operators closed for two weeks in February to help curb the spread of the virus.

Wynn Resorts, Ltd. WYNN shares were down slightly at $107.94 at the close Monday. 

Melco Resorts & Entertainment Ltd. MLCO shares were down 1.15% at $17.14. 

MGM Resorts International MGM shares gained 2%, ending the session at $25.05. 

Cruise Liners

The Carnival Cruise CCL-owned Diamond Princess was placed in quarantine for two weeks upon arrival in Yokohama, Japan Feb. 3 after a man who disembarked in Hong Kong was diagnosed with the virus. The shares of a number cruise companies have also been trading lower as the COVID-19 spread continues to negatively impact travel stocks.

Carnival shares were down 1.2% at $33.06 at the close Monday. 

Royal Caribbean Cruises RCL shares were up 0.09% at $80.48 at the close Monday. The stock has a 52-week high of $133.60 and a 52-week low of $89.48.

Norwegian Cruise Line NCLH shares were down 4.48% at $35.59 on Monday.

The stock has a 52-week high of $59.71 and a 52-week low of $39.36.

Medical Devices

A number of medical device stocks are benefitting from the outbreak.

Co-Diagnostics, Inc. CODX shares ended Monday's session 34.62% higher at $17.81 after the company announced it will provide COVID-19 tests to U.S. Clinical Laboratory Improvement Amendments, or CLIA, labs.

Alpha Pro Tech, Ltd. APT manufactures masks and protective apparel, goods that are already in high demand in China. Bulk orders are expected as the disease progresses.

The stock traded sharply higher after the company said Feb. 27 it expects to fulfill the remainder of $14.1 million in booked orders for face masks by the end of the second quarter as demand rises due to the COVID-19 virus spreading in the second quarter.

Global Corporations

Apple Inc. AAPL, Facebook, Inc. FB, Microsoft Corporation MSFT, Amazon.com, Inc. AMZN and Alphabet Inc GOOG GOOGL have collectively lost $238 billion in market cap, CNBC reported Feb. 27. 

The companies are the five most valuable in the U.S. by market cap. 

Coca-Cola Co KO reaffirmed its full-year 2020 guidance Feb. 21 and estimated the impact the coronavirus outbreak will have on its first quarter.

The company said it has enacted precautionary measures for employees in China such as providing face masks and hand sanitizers, installing temperature screening at its facilities and setting up health monitoring systems across its Chinese operations.

Lululemon Athletica Inc LULU Most of the athleisure retailer's 38 stores in China have been closed since Feb. 3 and some are reopened on a reduced schedule, Luluemon said in a Feb. 21 press release. The company’s online business has continued to operate.

Commodities Plunge

The prices of almost all commodities plunged amid fears the coronavirus is morphing into a pandemic, with negative implications for global economic activity and commodities demand, said  Caroline Bain, chief commodities economist at Capital Economics. 

“Prior to the virus outbreak, we had expected a gradual pick-up in global growth to support most commodities prices. This week, we revised our metals forecasts to reflect our more bearish view on the outlook for China," Bain said in a note. 

"In the next few weeks, as the global impact becomes clearer, we expect to revise our energy and precious metals forecasts."

If OPEC+ decided to deepen output cuts at meetings scheduled for March 5-6, there could be some respite for oil prices, she said. 

"The chances of further output cuts have increased in the last week or so as the virus has spread rapidly outside China. That said, given the scale of risk aversion in financial markets, any OPEC+ action is more likely to stem further falls in oil prices rather than give them a lift."

ETF Activity

ETF short selling has been highly active in the last two weeks during the broader market slowdown, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, said in a note. 

“We track short selling activity in over 2,500 domestically traded ETFs with short interest of $161 billion,” he said.

“Over the last two weeks we saw +$6.2 billion of additional net short selling in ETFs, an increase of just over +4.0%. The mega-shorts in the ETF sector held their spots in the ETF league tables, with the top seven most shorted ETFs holding onto their positions. But spots 8 to 20 saw a lot of movement as short sellers adjusted their hedges and looked for Alpha in different sectors.”

The largest increase in ETF short selling occurred in the SPDR S&P 500 ETF Trust SPY, as the biggest portfolio hedge got even bigger with $3.6 billion in short selling over the last two weeks, he said. 

The PowerShares QQQ Trust, Series 1 QQQ and iShares Russell 2000 Index IWM had $328 million in short covering as portfolio hedgers and short sellers seeking alpha looked toward the larger-cap S&P 500 instead of the tech-heavy Nasdaq and broader market Russell 2000, Dusaniwsky said. 

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Public domain photo via Wikimedia.