Day Ahead: Top 3 Things to Watch for March 10

By Kim Khan

Investing.com - The S&P 500 is now a drop of about 32 points away from being in a bear market (it came within a couple of points intraday). That’s just a decline of 1.15% and relief rallies notwithstanding, shows investors are seriously concerned about a global recession.

Yields hit yet more record lows, with the 10-Year Treasury falling below 0.4% to an intraday low of 0.318% before recovering about 0.56%.

The economic and earnings calendars are sparse Tuesday, which is just as well since the markets are in the grips of big events and any granular numbers would be largely ignored.

Instead, along with Wall Street stock index futures investors should be looking at headlines about how governments are handling the Covid-19 spread and the economic impact of the virus.

1. White House Weighs Fiscal Options

With the markets in panic mode, President Donald Trump is set to meet with his economic team in crafting a further response to reassure investors and businesses.

Among possible actions are guaranteeing paid sick leave, a payroll tax cut or tax cuts for specific industries. A spokesman for Sen. Chuck Grassley, who chairs the Senate Finance Committee said “targeted tax relief measures” are being considered.

Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow will brief Republican senators at a lunch Tuesday, NBC reported, so headlines could start to flow out then.

2. Who Goes on Lockdown Next?

Investors will also be looking for any more strict moves governments make in attempts to keep Covid-19 in check.

Israel announced a mandatory 14-day quarantine for all foreign visitors and then Italy’s prime minister announced that restriction of movement will be extended to the entire nation.

This move will “lead to other European countries to become more risk averse” and spillover effects will be seen directly and indirectly through “the economics of fear,” Allianz (DE:ALVG) Chief Economic Adviser Mohamed El-Erian tweeted.

It’s also another signal of how difficult it is for markets to get its hands around slowdown left-tail risk, or the risk of portfolio returns moving than three standard deviations from the mean due to a market shock.

3. Oil Shows Signs of Slight Recovery

The oil market had everything for bears today, with Saudi Arabia and Russia turning a busted production cut deal in to an all-out price war on top of more fears of demand destruction.

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That resulted in crude prices plunging 25%, the worst drop since the 1991 Gulf War.

Price recovered slightly in late trading Monday, rising about 2.3% from the day’s settlement.

Tomorrow the American Petroleum Institute will release its measure of weekly U.S. oil inventories, which rose by 1.69 million barrels the week before.

The question is how much the market will be interested in U.S. supply, let alone numbers from last week.