Return to Transcripts main page
First Move with Julia Chatterley
The White House Restricts Travel From 26 European Nations; U.S. Stocks Plunge At Five Percent Premarket For The Second Time This Week; The NBA Suspending All The Remaining Basketball Games. Aired 9-10a ET
Aired March 12, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:32]
JULIA CHATTERLEY, CNN ANCHOR: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's your need to know.
Travel halts. The White House restricts travel from 26 European nations.
Trading halt. U.S. stocks plunge at five percent premarket for the second time this week.
And season halt. The NBA suspending all the remaining basketball games.
It's Thursday. Let's make a move.
Welcome once again to FIRST MOVE. Historic times, historic movements, too across global stock markets in particular as one by one, they fall into
bear market territory.
U.S. futures, as I mentioned, are limit down once again, that means we simply can't go lower than five percent in premarket trading. Ultimately,
it means like Monday, we could therefore open down more than five percent. if we hit seven percent, of course, we could see trading suspended -- that
15 minutes suspension, again that we saw in trading on Monday.
I can give you some kind of gauge. The S&P ETFs is something that tracks the S&P 500 is down around six percent at this moment, so that's giving you
a sense of where we are. Ultimately, though, we're looking at the Dow on track for yet another 1,000-point plus drop.
It follows Wednesday's session where the Dow fell into bear market territory dragged lower in part by an 18 percent drop in Boeing, on cash
flow fears. It's the entire airline sector, of course, too, at the heart of the crisis that we're seeing here.
The S&P 500 could also follow into bear markets, 70 percent of its individual stocks already down more than 20 percent from their recent
highs.
The latest short-term driver at least, President Trump's primetime address to the nation last night where he announced a 30-day travel ban on 26
nations in Europe.
Perhaps no surprise, therefore, and you can take a look at this now. European stocks are lower. The travel shares are among the hardest hit,
falling some 10 percent
What about the European Central Bank? Well, they decided to leave interest rates unchanged today. Yes, unchanged, not taking interest rates further
into negative territory. I think a lot of people will welcome that.
They did, though, take various steps to inject emergency liquidity, support lending to the real economy. We'll take you through the details very
shortly.
Let me give you a look as well, and you're seeing it on your screen. Oil under pressure once again, down some six percent plus, but it is a global
story.
Japan, as you were seeing there in bear market territory, too. Australia, a big selloff there, and they also announced $11 billion worth of stimulus.
India, also in a bear market.
Now for all the stimulus efforts, the only real thing I think, that gives both investors and ordinary people here a greater peace of mind is
information. Pure and simple -- on the outbreak and on the true number of cases, and right now, we simply don't have it.
Let's go to the drivers. The United States has restricted travel from Europe for 30 days. This is the President responds to mounting pressure to
address the coronavirus outbreak. All travel from 26 European countries will be suspended from midnight on Friday. The United Kingdom though and
Ireland are exempt.
After the announcement, the administration clarified that the restrictions would not apply to U.S. citizens nor to goods coming from the continent.
U.S. Vice President Mike Pence appeared on CNN a short while ago defending President Donald Trump's decision.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: We've recognized our health experts tracking global data that the epicenter of the coronavirus
has shifted from China and South Korea to Europe.
Two weeks ago, there were roughly 500 coronavirus cases in Italy. There's 12,000 as of today, a thousand in Germany yesterday, a thousand in France,
and so the health team came into the Oval Office, presented that to the President and he made the decision on the spot after hearing from all sides
that the best thing we could do was to spend all travel ...
(END VIDEO CLIP)
[09:05:07]
CHATTERLEY: Nic Robertson joins us now from Downing Street in London. Nic, the European leaders are up in arms saying this was unilateral action.
Medical experts are saying this is like shutting the barn doors after the horses have bolted. People are condemning this move from the White House.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: Oh, absolutely. And that's what we've heard in this joint statement that has come from the
European Council and European Commission President saying that they disapprove of the United States unilateral action.
We've heard from the British Chancellor today, saying that Britain bases its decisions on scientific evidence and scientific facts, and it doesn't
believe that closing borders actually stops the spread of the virus.
And interestingly, look across some of those countries that the United States has banned. Lithuania who has only had, I think now, three, maybe
four cases of coronavirus, yet it's lumped in with Italy on that ban, perhaps yes, because the borders between those countries is all part of the
Schengen area are transparent, people can move from one place to another.
But Britain has over 400 cases, Ireland 43 cases. Ireland just announced the first -- its first death of a citizen from the coronavirus. The Prime
Minister in Ireland has been warning citizens today that more sickness will come and that more tragic deaths to be expected.
It doesn't seem at all that the Europeans are minded to think that what President Trump has done is right for the United States and right for the
health and welfare of the United States citizens, and neither do they think is going to help them here in Europe.
And of course, beyond that those major concerns about how it's going to affect the economy in Europe. It's going to damage business massively, just
when countries are trying to figure out how they can get through this crisis, limiting the economic impact.
CHATTERLEY: Absolutely. And it's also leaky to your point. I mean, you've illustrated the point that you could if you can get the flights and that's
a far bigger question, perhaps at this moment, fly by London and still come to the United States.
Also, if you're a U.S. citizen here, you've still got the right to come back to the United States, even if you will be checked on entry. It's leaky
as a system.
ROBERTSON: You know, when you look across the border, what every country is doing, there are leaks in most systems. It's the authoritarian states like
China who have been able to implement some really strict and stringent controls over people who have been successful.
They moved slowly, and the evidence here -- the medical evidence -- is that President Trump is reeling and this is what the critics are saying has
moved too slowly.
There's a lot of criticism being handed around at the moment. Look, for example, about the situation in Ireland today. The Irish Prime Minister
announces that all the schools in Ireland will close as of 6:00 p.m. today. We haven't heard the British government making a similar announcement about
the schools in Northern Ireland. Maybe that will come later today.
But there, you have a transparent border and no difference between one side of the border to the other.
So there's a lot of criticism being spread all around about the way countries are handling it, in part because people are very, very concerned
about the health and welfare and feel that they're being shortchanged.
So I think we're going to hear a lot more criticisms going forward.
CHATTERLEY: Yes, it's just a sense that they've tried not to alarm people and panic people, but as a result, aren't prepared at the same time and
it's finding that balance and quite frankly, right now leadership isn't.
Nic Robertson great to have you with us. Thank you so much for that. Now to Nic's point there, the confusion created is what we're seeing. Investors
react to at this moment, stock markets around the world simply taking fright.
John Defterios joins us on this. John, there is a leadership vacuum once again, I think that was illustrated last night, but it just compounds the
pressure that we've seen and the fright that we've seen from investors globally.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: I think you hit the nail right on the head, Julia. All investors really kind of took from this
outside the United States is a reason to sell. As one leading strategist said, sell, sell, sell on the words of Donald Trump because of the travel
restrictions, they are much more restricted than expected and also no real clarity when it comes to policy right now.
So you and I have talked about this idea of managing expectations. This is a case of mismanaging expectations. They talked about having a major plan
for the airline industry, for example, all we really know about right now is there's a three months tax holiday, and we're not really sure whether
the U.S. healthcare system has the proper screening at the statewide level and whether the umbrella of the Federal policy is correct.
So we're seeing a lot of red right across the board. We've had selling in Europe for six days on the trot and we're right near four-year lows and the
obvious losers, the airline stocks, hospitality, retailers, cinema stocks in this trading block down 10 to 15 percent.
[09:10:03]
DEFTERIOS: I think this is a fair criticism. There's too much emphasis within the G-7 states and even in the G-20 about cutting interest rates.
The U.S., the U.K., Australia, Singapore, the E.C.B., the European Central Bank is on the docket right now.
How do you revive growth is the big question right now, and I think during the 2008-2009 global financial crisis, the U.S. was leading by example.
I think we're in a case right now, where they were in a state of denial, as you were suggesting at the White House, and then when they roll out a plan,
it is well below the expectations, the bar is very low right now and that's why we see the selling taking place.
CHATTERLEY: Oh, John, that's such a great point. It's the combination here of the economics of sudden stops, which is what the airline investors, what
the companies themselves are dealing with at this moment versus the economics of fear, which quite frankly, is borne out of a lack of
information and information that we're simply not going to get.
The oil market. I want to draw your expertise there too, because clearly, very much at the heart of all of these issues, whether it's the airlines,
whether it's the threat of recession risk here as well, plunging once again, not to mention all the challenges of the big suppliers here that
we've been talking about now for days.
DEFTERIOS: Yes, so you know, Julia, in the airline business, everybody fights over the landing slots to go into these transatlantic trips to New
York and Washington; now, the long haul flights to Los Angeles, they're going to be restricted.
And not surprisingly, this is going to hit the oil market and we already see it playing out, because jet fuel represents about seven percent of
daily global demand. What does that mean? That's about six million barrels. That's a lot to move a market.
It's 12 percent jet fuel of the overall transportation market, then we have to carry this down a little bit further. If people are not moving around
because they're not going into shopping malls, not going to restaurants and the rest, gasoline demand is going to drop and we see six to seven percent
of the headline number, how about 10 percent for gasoline supplies at this stage?
That's what we're seeing, and also, kind of this double whammy. Aramco delivered on the promise already of what it's going to be offering, $25.00
a barrel to the European purchasers of its fuel. That's a deep discount, about $5.00 to $6.00, and we see that Reliance Industries, which is a major
partner of Saudi Aramco already taking a supertanker of two million barrels going into India, taking advantage of this discount.
It's kind of a cruel world out there. But that is the reality.
CHATTERLEY: Yes, it is the reality and it's to the point that you made at the beginning there, rate cuts don't help, giving people more money
arguably doesn't help if they're not willing to go out and spend. They simply can't. It's tough here. The balance is tough.
John Defterios, great to have you with us.
Very much in line with that, the European Central Bank leaving Eurozone interest rates unchanged as it unveiled a package of measures to improve
liquidity amid the coronavirus crisis.
And in the next half hour of course, we'll hear directly from new chief Christine Lagarde. Anna Stewart has been pouring over the details of what
the European Central Bank announced and didn't announce today, interesting move here from the European Central Bank to say, look, we're not taking
rates into further into negative territory here, because that's going to harm the banks. We have to use other methods here.
ANNA STEWART, CNN REPORTER: And I think banks will be relieved by that news.
CHATTERLEY: Yes.
STEWART That we're not going to go further into negative territory, of course, equities not looking quite so happy. You would expect monetary
policy to be looser, given the risk of recession we're looking at across the board, frankly, in the Eurozone, even of course, Germany.
So rates remain unchanged. But there's a lot on supporting banks with funding and additional LCR row to bridge between the current one and the
one that hits in June -- which hits in June, much more favorable rate.
We're looking at 25 bips below the main refinancing rate, although I have to say there was some expectation for it to be even lower still, perhaps
lower than the main deposit rate. So we didn't get that.
And an additional announcement on QE expanding asset purchases by 120 billion euros this year. That's $135 billion. We just had an extra press
release talking about relaxing rules for banks.
So that's something I think we'll get much more info from Christine Lagarde in the press conference coming up, relaxing capital buffer requirements,
trying to get banks, lending to these small and medium sized businesses, particularly of course, in places like Italy, where they're really going to
struggle with cash flow in the coming weeks -- Julia.
CHATTERLEY: Anna, great job. Thank you so much for that. All right, let me bring you up to speed now with some of the other stories that are making
headlines around the world.
The professional U.S. basketball league, the NBA has suspended its entire season after one of the players tested positive for the coronavirus.
CNN Sports Andy Scholes joins us now. Andy, I think for many Americans, this is where it really became real, where this outbreak, we saw what
impact it can have here. Talk us through it because there are big financial implications here, too.
ANDY SCHOLES, CNN SPORTS: There certainly are, you know, the NBA and basketball in the United States, is you know, it is a billion dollar
business. And I'll tell you what, Julia, this was such a wild scene, as all of this unfolded Wednesday night.
And when the NBA ends up resuming, we really have no idea, but the Thunder and the Jazz, they were actually on the court, about to start play when
they found out a Jazz player had tested positive for coronavirus.
[09:15:10]
SCHOLES: According to ESPN, that player for the Jazz is all-star center Rudy Gobert. CNN has reached out to Gobert's representatives, the Jazz, and
the NBA, none of which confirmed that report.
But the news prompted officials to announce that that game was postponed. Then the NBA announcing that the rest of this season was going to be
suspended following Wednesday night's games.
Now, I'm going to show you some video of Mavs owner, Mark Cuban his reaction when he found out the news while the Mavs were playing the Nuggets
and Cuban saying after their game, this whole situation was just unreal.
(BEGIN VIDEO CLIP)
MARK CUBAN, DALLAS MAVERICKS OWNER: This is something out of a movie, and you just don't expect it to happen in real life.
But that's the randomness of the world we live in, and so it's stunning. But we are where we are, and we have to be smart in how we respond.
(END VIDEO CLIP)
SCHOLES: Now, the Jazz played the Raptors on Monday. Before that, they were on a four-game road trip playing against the Pistons, the Celtics, the
Knicks, and the Cavs.
According to ESPN, all of those teams are being asked to self-quarantine, and since playing, the Jazz, you know, those teams went on to play other
teams. So the majority of the NBA has come into contact with someone who had direct contact with Rudy Gobert that really gave the NBA no choice, but
to suspend play now.
For now, the NCAA Tournament, a big college basketball tournament here in the United States, it's going to go on as planned, but with just no fans
allowed in the arenas or the stadiums, only team personnel and a select number of family members are going to be allowed to go to those games.
NCAA President Mark Emmert saying in his statement, "While I understand how disappointing this is for all the fans of our sports, my decision is based
on the current understanding of how COVID-19 is progressing in the United States." Emmert adding that they're going to continue to monitor and make
adjustments as needed.
The NHL, meanwhile, says they're also monitoring the situation and will have an update on their league status later on Thursday.
But Julia, just so many implications to these leagues having to cancel games and then now having bans at games, it's costing the leagues millions
and millions of dollars, but of course, they're of course doing it out of precaution because obviously, they don't want anything to get worse than it
already is.
CHATTERLEY: Absolutely. Health first comes before everything. Andy, fantastic to have you with us. Andy Scholes there. Look, I got it right the
second time. My apologies.
All right, let's take a break here on the FIRST MOVE. We're counting down to the market open and what kind of reaction we get when the markets open
up. We are in the limit down. We can't go lower than dive percent premarket. Indications are, we will open lower.
And of course the implications for the airlines, of course, too. Stay with us. More to come.
(COMMERCIAL BREAK)
[09:20:53]
CHATTERLEY: Welcome back to FIRST MOVE. Wall Street bracing for another day of steep losses. I can give you a sense of the global picture here.
Right at the top, you can see U.S. futures limit. We hit the limit, the lower limit of five percent earlier in premarket trading, so we simply
can't trade below that now.
But indications from those markets that track the U.S. S&P 500 show a drop of more than seven percent. So a trading halt when we open up in around 10
minutes' time is possible once again.
Let's get some context here. We're now joined by Liz Young. She is with BNY Mellon Investment Management. Liz -- oh, sorry, my apologies.
Underlying the uncertainty of course, the dramatic news, Liz is coming up later on, but the dramatic news from the White House late Wednesday
sweeping travel restrictions on people coming from Europe.
The 30-day suspension kicking in on Friday, barring non-Americans from entering the U.S. from any of the 26 countries in the Schengen area.
Greg Valliere, Chief U.S. Policy Strategist at AGF Investments joins me now. Greg, I can't miss you. My apologies for that. Talk me through your
assessment of the White House's handling of the situation, but also the decision to ban entry from 26 European nations.
GREG VALLIERE, CHIEF U.S. POLICY STRATEGIST, AGF INVESTMENTS: It gives me no pleasure, Julia to say that this speech last night was a disaster. He
didn't talk about some of the things that could be done because they're stalled in Congress.
He was confusing on trade, on who would be eligible to still travel. He had to retweet corrections after the speech. And perhaps the most damning
indictment of all is in the markets this morning. The markets certainly are giving this speech a vote of no confidence.
CHATTERLEY: You suggested that it was possible that Congress could leave at the end of this week without coming up with any stimulus measures, anything
to soothe ordinary Americans concerns here, not just about the virus, but the impact perhaps on jobs on the risk of shutdown and the implications.
Do you think that Congress will be shamed into doing something this week?
VALLIERE: Well, that's the word for it. They would be shamed or embarrassed into doing something, anything really substantial. A payroll tax cut, which
looks less likely, or a big chunk of financial aid to people, which is not imminent.
That's not going to happen. They might do a few things to improve unemployment benefits, sick leave benefits, things like that. But I don't
see anything that's imminent in Washington that will make the markets happy. I don't see anything that dramatic.
Later in the month, I think the Federal will move, but I think that's in the markets, and they're going to be running out of ammunition soon.
So sadly, I don't see much from this city that could be even remotely considered a panacea.
CHATTERLEY: What about just mortgage relief payments, if people are struggling to make money payments. The President keeps talking about a
payroll tax holiday. Are these things even possible, Greg?
VALLIERE: Well, a payroll tax holiday is possible, but that costs a ton of money. It would almost instantly raise the deficit to close to $2 trillion
a year. We are a little over $1 trillion a year now.
But I could accept the argument that desperate times require desperate measures and they might do that. I think more targeted aid makes some
sense.
People who need help, because they're on sick leave, people who, as you say, need help because they're late in their mortgage payments. I think
there will be a lot of these things.
Unfortunately, Congress is moving so glacially I don't see any of the stuff getting done anytime soon.
CHATTERLEY: Greg, I made the point earlier on the show that the only thing that will give people calm here is more information, information on the
number of cases on the idea that we are on top of this, that we can contain it and we're not going to get that for a while and I think that's what's
playing out in the markets too.
[09:25:01]
CHATTERLEY: Is this a risk for President Trump?
VALLIERE: Yes. Absolutely. I would say, first of all, the one slight glimmer of hope is that new infections in Wuhan have gone way down. They've
leveled off and dropped.
Maybe China will lead the way out just as they lead the way in, maybe we'll see better numbers.
But as for Trump, Julia, I think you've got to say that in the last two weeks, his chances for reelection have dropped considerably.
He has not handled this particularly well. Joe Biden looks strong. His -- Biden's numbers in Michigan a couple of nights ago were extraordinary. His
support among African-Americans, blue collar workers.
I think Biden now has a plausible shot to win. I think Trump needs to turn this around. But a speech like the one he made last night just further
hurts his chances of winning reelection.
CHATTERLEY: How can he fix this in the short term, Greg? Another speech? I mean, this was primetime. It was scripted. It shouldn't have been this
messy.
VALLIERE: Yes, I mean, to be fair. I mean, a lot of this is out of everyone's control, including his, but I think the communication has to get
a lot better.
I think more should be left to Dr. Fauci, who is extraordinary and very well-respected. But this talk from the President that oh, things are going
to get better that this is going to go away. It defies credulity, and it hurts his credibility.
CHATTERLEY: The market is not buying it, certainly.
VALLIERE: No.
CHATTERLEY: Greg Valliere, great to have you with us. Chief U.S. Policy Strategist at AGF investments. Thank you so much for that.
And be sure to stay with CNN. Dr. Sanjay Gupta is answering viewer questions about the novel coronavirus in another Town Hall, Friday live at
10:00 a.m. in Hong Kong.
We are counting down to the market open this morning. We are expecting to see severe losses when these markets open. We've got you covered. Stay with
us. That's after this.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell at the New York Stock Exchange. A demonstration there of not shaking hands going
on, on the balcony. What a tough day to IPO.
We are open for trading and we are seeing significant losses already. Look at that. We've got the Dow already down more than seven percent. The NASDAQ
hitting almost seven percent, too.
Look the New York Stock Exchange suspends trading for 15 minutes if stocks fall for seven percent or more and we're already there for the Dow Jones as
you can see. We are teetering there for the NASDAQ. The S&P 500 is also approaching that seven percent level.
We saw the United States implementing a travel ban on the E.U., which has just added to the confusion and the uncertainty that we are seeing.
The European Central Bank leaving rates unchanged earlier, of course, and European stocks are also under pressure. Wow. These are incredible market
times.
Liz Young is the Director of Market Strategy at BNY Mellon Investment Management. She does join us now, you'll be pleased to know. Liz, great to
have you with us.
LIZ YOUNG, DIRECTOR OF MARKET STRATEGY, BNY MELLON INVESTMENT MANAGEMENT: Good to be here.
CHATTERLEY: I am loss for words here in terms of the price action that we're seeing.
YOUNG: Yes, I mean, this is unprecedented at this point. And it's really easy to get scared right now and I'd be lying if I said I wasn't a little
bit anxious about all of this.
What we're really watching is how this liquidity moves to the market, how it starts to affect credit markets, and we're probably going to continue to
see some selling pressure, or best case scenario, a lot of chop around here in a range as the markets wait for more information.
And the information that I think we're looking for is that number one, the virus spread slows around the globe, which obviously has not happened yet,
and we're just hitting kind of that, that time in the U.S. where things are getting to a peak of anxiety. So we're still looking for information there.
The market is probably not going to get the information it needs for weeks, maybe even a couple of months yet to find out how it's hitting the
corporate sector.
CHATTERLEY: You made some comments yesterday and I picked up on them and they were so important. You said the market simply can't get comfortable
here. Investors can't get comfortable because they lack exactly that -- the information that they need to get a grip on what the coronavirus means not
just in terms of economic impact, but just the number of cases. We don't have enough information.
What is the market pricing at this stage when we see an additional seven percent approximately losses? We're already in bear market territory, off
more than 20 percent from recent highs. What are we pricing in terms of economic damage?
YOUNG: Right. And that's the right way to frame it, Julia, is that the market can't get comfortable, like I said earlier, because we don't have
the information yet.
So what it's doing is pricing in the worst case scenario. It's priced -- it's starting to price in a recession. It's starting to price in earnings
being flat to negative during the next quarter, and maybe even the second quarter.
It's pricing in a global recession, and it doesn't mean that the market is wrong. But at this point, if it can't decide which direction to go, it's
going to say, okay, you know what? What's the worst thing that could happen here? The worst thing that could happen is that we come down from the
highs, 30 percent, maybe more.
And what does that look like? What does that look like for an economy? What does that look like for corporate earnings? What does that look like for
the apple tree that we had before this? And that apple tree at all-time highs had some healthy companies on it. It had some unhealthy companies on
it. It had some sectors that were under pressure, energy being one of them.
And what does it look like when we shake that tree this time? All Things are not intended to survive a recession. So if we do dip into recessionary
territory, what's happening is that the market is pointing out for us where the vulnerabilities are.
CHATTERLEY: And we're seeing that with things like the airline stocks, the travel sector in particular, where at least we do have some gauge of
numbers and we're seeing capacity cuts, to your point.
We are trying to understand the economics of sudden stops for businesses and for industries. We've also got the fear, the economics of fear going on
here and the impact that that has and the unknown that we've also discussed here as well.
What about financial sector risks? Are we seeing any tensions in terms of banks hoarding U.S. dollars because they're afraid of payments being made,
or are markets functioning well at this stage?
YOUNG: We are seeing some signs of liquidity getting squeezed here. I don't know that that should be a huge surprise when we see such selling pressure
in the market.
So liquidity has gotten tighter. Watching financial conditions and really the velocity of money around the globe is what the Federal Reserve is
likely looking at to decide what its next move is going to be.
Because the impact that the Fed has is really on the liquidity of the markets, the Fed cannot, as we all know, it can't cure the virus, it can't
create economic growth, but it can help liquidity move around the globe. And we'll probably see some action from Central Banks around the globe to
keep that going.
[09:35:30]
YOUNG: As far as banks in the U.S. and some of the big banks in the U.S., there have been questions about is it stressing them?
Banks in the U.S. are still better capitalized than they were pre-financial crisis. They're holding a lot more in reserves, and they're being safer
about those reserves. So I'm not overly concerned with the big banks in the U.S. at this point.
What I think is going to get hit is some of those mid-sized banks, some of those smaller sized banks, particularly the ones that are exposed to
consumer lending and the ones that are exposed to the energy market.
So we are going to see some differences that happen among size as we move through this and we've just actually hit the trading halt.
CHATTERLEY: Okay, yes. I just wanted to mention though that bell once again, same as we heard on Monday, that denotes a halt in trading.
You've seen the markets moving, inching ever closer to that down seven percent. We've now hit that as you can see on your screen, so we now have a
15-minute trading halt.
This gives traders investors, time to pause, to breathe, to take out some of the initial panic. Were only six and a half minutes into the trading
session here, so this just gives everybody a second to breathe, to understand, to perhaps second guess the selling pressure that we're seeing.
The problem is and I'll come back to that, this is the second time in a week that we've seen this trading halt implemented for this exact reason.
We just don't have the clarity that's required to take some of this fear away.
YOUNG: Right. We don't have the clarity and what these halts are intended to do is limit more of that emotional selling, and it's intended to limit
what we call a flash crash. Seven percent could be considered somewhat of a flash crash, but it's intended to limit the more severity of a flash crash
going down.
And hopefully it works today. It worked on Monday. And what I mean by worked is that we didn't have to do it again on Monday after the first one.
So we're looking at the 15-minute halt right now. We'd have to hit 13 percent, to see another halt. And then a 20 percent down would close the
market for the rest of the day. I'm hopeful that we don't go there.
One of the things that we were watching yesterday, and that I talked about yesterday was the markets -- a bunch of different indices crossed into bear
territory, so they crossed over that 20 percent down mark. And that's usually when markets try to validate whether or not we deserve to be in a
bear market.
And if you remember what happened in the fourth quarter of 2018, we did cross into bear territory, but then we bounced back right away afterwards,
partially because the market decided we didn't deserve to be there.
The economy was healthy. A lot of the forces that were bringing it down, were within our control, we could remove tariffs, we could slow down the
trade war, and we could change Fed rhetoric at that time.
This one is different, and this is different because the forces that are pressuring the market, not only the virus, but the energy market and the
disputes that are going on in the Middle East are outside of our control.
And with the lack of certainty around how this is going to spread and how this is going to affect corporations, it is giving the market another
question mark of, do we deserve to be in bear territory? And today, what the market seems to be saying is, yes, we do.
CHATTERLEY: Liz, you raise so many great points there. Coming into this session around 70 percent of the S&P 500 stocks were already in bear
markets.
So just to explain what that means, down some 20 percent or more from their recent highs here. You're saying that we're simply justified with having
this analysis and saying, actually, we should be in a bear market or in bear market territory as a result of the pressure and the concerns and the
lack of information about the economic impact as a result of the coronavirus here, right?
What stops the selling list, if we're not going to get clarity on the coronavirus outbreak, what stops this? Do we get to a point where things
are so beaten up that people go, it doesn't make sense to sell anymore?
YOUNG: Well, first, I want to clarify, it's not -- this isn't really based on actual analysis yet because we don't have the data. We don't have the
data to model this out.
So what the market is saying is really more from a confidence and sentiment perspective that we deserve to be in bear because we don't have a good
reason not to be, so there isn't a good reason to go back up.
And I always want to remind investors that the market trades on expectations more than it trades on events. So the market is right now
pricing in what bear territory and a justified bear territory looks like.
[09:40:10]
YOUNG: If we get positive news, if we get a fiscal package, if we get some support for those small and mid-sized companies, if we get some support for
the labor market that might get hit or portions of the labor market that might get hit, that would be good news for the market, at least
temporarily.
To your question about what would be selling off? What would we be looking at is where people might be overly exposed to risk? This is a time when I
wouldn't want to be overly exposed to index tracking ETFs really anywhere around the globe.
So if you have over exposure or you're overweight, whether by accident or on purpose, some of those index tracking ETFs, the reason that those are at
risk is because they're going to follow all of those emotional moves down and you don't want to be 100 percent exposed to those emotional moves.
This is why diversification is important and this is why active management is important because active managers look at the quality of a company, the
quality of their leadership, the quality of the cash flow and the company's ability to weather a storm like this.
CHATTERLEY: Absolutely. Liz, great to have you with us at this moment. Liz Young, Director of Market Strategy at BNY Mellon Investment Management.
Emotion was the word there that Liz used and this is exactly what we're trying to remove.
We are in a trading halt. We hit the limit. The first circuit breaker kicks in at seven percent. So that's why, if you're just joining us, you can see
the Dow, the NASDAQ, the S&P 500 in front of you, and those price levels are not moving.
We are in a 15-minute trading halt for the second time in a week. Pressure as a result of an announcement from the White House yesterday banning
travel from 26 European nations, just giving the market another reason for jitters here.
What's weighed in this session in particular? They are financials, the airlines stocks in particular, a lot of discussion already including Greg
Valliere, you heard him saying this is going to have a greater negative impact in terms of the economy and particularly in Europe than it is going
to benefit this outbreak of the corona virus in the United States.
You can see Europe as well. That was the impact. As a result in Europe. We've also got Brent crude under pressure as well.
I want to bring in Clare Sebastian here, who also is at the New York Stock Exchange. Clare, I'm not there this time. But obviously you were listening
to that bell. It's a strange feeling when these circuit breakers kick in, to reiterate a 15-minute break here to just simply get some of the emotion,
the emotional response out of this market and to allow traders to think whether they want to push these markets further.
And we could see that when we open again in 10 minutes' time.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Absolutely, Julia. This happened just before 9:36 in the morning, so just really five or six
minutes after the market opened.
A very similar situation to what we saw on Monday when we also saw this halt after the S&P 500 fell seven percent.
Now of course, it has joined the Dow Jones Industrial average in bear market. Until it closes in a bear market though we cannot call this a bear
market.
But it is looking very much like we are in that position now. That this 11- year-old record bull-run looks like it's coming to an end. It's the uncertainty. It's the fear.
But I think all of that now that we have this European travel ban, now that the W.H.O. has labeled this a pandemic, people are starting to feel like
the fear is catching up -- the fundamentals are catching up with the fear.
They're starting to price this in as much more than just a supply chain issue for China exposed companies, it is much more than just an earnings
issue.
This is now looking like a global economic event, something that could tip some if not all economies into a recession --Julia.
CHATTERLEY: Yes, we've been discussing, Clare, throughout the show. It's just tough to gauge the economic impact. The only real area where we can
analyze numbers and we've had warnings from the airline body, the IATA as well saying this is going to have billions, more than $100 billion impact
on global airlines.
This is just salt in the wounds, particularly for the big international carriers today, and it's really them that have dragged these markets down
already in the session, and resulted in the halt that we're now undergoing.
SEBASTIAN: Yes, this is brutal for those airline stocks, Julia. Many of them have, particularly, the big U.S. carriers have lost about half of
their value since their highs earlier this year, even before today, and we're now seeing more steep losses today.
Like this is a direct hit to them. Clearly, they're going to have to reduce capacity even more than they already have.
We're already seeing these airlines, by the way, trying to sort of insulate themselves against the economic pain by introducing hiring freezes, you
know, CEOs in some cases have taken pay cuts or a foregoing pay.
There are a lot of aggressive cost cutting measures, aside from capacity reductions that we're seeing and look, the clear sense here is that people
don't know. They are withdrawing guidance and I think forecasts are going to have to be updated.
[09:45:03]
CHATTERLEY: Make sense? Clare Sebastian, great to have you with us. We will await and see what happens when trading reopens. Don't move. We need you
there. Clare Sebastian there.
All right, plenty more to come. We're in a trading halt period, a 15-minute break of trading at the New York Stock Exchange, down as you can see over
seven percent across the board for the U.S. majors. More analysis to come. Stay with us.
(COMMERCIAL BREAK)
ANNOUNCER: This is CNN Breaking News.
CHATTERLEY: Welcome back to the show. We are currently in a 15-minute trading halt for the second time in a week. Unprecedented price action on
the U.S. markets.
Let me explain how this works once again. If you hit a fall of seven percent in trading, circuit breakers kick in. It suspends trading, simply
trying to take the emotion out of the price action that we are seeing here, and we did it within five to six minutes of the trading session starting
here.
So what you're seeing now, zero movement for these U.S. markets. In around two minutes' time, the markets will reopen, and then we'll reassess.
Clare Sebastian is at the New York Stock Exchange watching the discussions there, I'm sure there's an eerie silence as people just wait and see what
happens when these markets open up once again -- Clare.
SEBASTIAN: Yes, Julia, sort of milling around on the floor going on. I have to say, it feels like it passes very quickly, these 15 minutes but as we
saw on Monday, and as you say, the idea is to sort of give everyone a timeout to let them really think about why they're selling.
And I think, you know, that did in some ways work on Monday. We did see selling accelerate at the end of the session and obviously there are many
hours of trading left to go after this, but it did bring some stability for a few hours to this market.
But then again, a lot has changed since then. The W.H.O. was labeled this a pandemic. We have now a ban on European income and travel to the U.S. which
takes effect on Friday at midnight.
So there are a lot more fundamentals, a lot more fact that this market has to grapple with. And of course, that hits the travel industry right up
front.
But as the U.S. Travel Association pointed out today, Julia, a lot of people rely on travel for work. They say about 15 percent of Americans, and
a lot of them work for small businesses. So this isn't just about the travel industry. This is just another way in which sort of daily life as we
know it is set to change for a brief period of time, and that is something that is signaling, you know, signals -- sending signals of potential
downturn in the economy here to traders.
CHATTERLEY: Yes, we just tried to get a sense of the economics of sudden stops here, sudden stops for industries when airline chiefs are saying this
is worse in terms of capacity cuts than the aftermath of September the 11th. It gives you a sense of the scale of what they're dealing with here
and it was them that weighed on the market.
There is the bell. So we've simply opened up trading again, and we'll just now watch and see what happens in terms of pressure on these markets,
Clare, to your point, and we've been discussing this throughout the week.
The next level where a circuit breaker kicks in is significantly below where we're trading right now.
SEBASTIAN: Yes. That's right, Julia. It doesn't have to hit seven percent again. If it goes back under seven percent, and then hits seven percent
again, the circuit breaker doesn't kick in, it has to hit 13 percent. Again, that will incur another 15-minute break.
And if the market hits a 20 percent, fall in one day, then it is closed for the day. Although, I will say, if these things happen after 3:25 p.m., then
the market continues trading and I know and as you know, we do see a lot of trading in the last hour. We've seen a lot of volatility over the past few
days.
So the day is young, a lot more headlines could come out. You know, we just have to keep watching what's going on and look, I will say though, this
isn't clear cut. This is a black and white all selling among traders.
I've spoken to a number of people over the weekend, even this morning who are sort of carefully thinking about moving back into certain high quality
blue chip stocks and where they might see a buying opportunity as the market hits these bear market levels.
CHATTERLEY: You make a great point there, Clare, for every seller there is a buyer. But it's how much further and below they are. We are up in
trading. We're going to continue to watch these markets. Stay with us. We're back right after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show. We are looking at markets under severe selling pressure here. We are approaching losses of nine percent as
you can see there on the Dow. We have had trading suspended for 15 minutes. It's now kicked back in.
[09:55:02]
CHATTERLEY: Remember the downside levels to watch now, a loss of 13 -- one three -- percent, we will then see further circuit breakers applied. What's
caused this further turbulence?
A press conference from President Trump last night simply not hearing measures to address the economic damage that's been wrought by the
coronavirus, that travel ban on Europe, of course, too, creating real fear and jitters in the market yesterday.
I'm willing to call it fear at this stage. We'll continue to watch the price action. It's certainly going to be volatile for the next few minutes.
I think everyone will be watching the numbers here just to see whether we can bounce off the lows. Expect volatility.
We'll be back throughout the next few hours to continue to keep you abreast of developments.
For now, though. You've been watching at FIRST MOVE. Stay with CNN.
(COMMERCIAL BREAK)
[10:00:00]
END
