Investors are worried. Some are clearly scared. A "sell stocks first, ask questions later" mindset roared back into the market last week thanks to the growing concerns over the coronavirus spreading.
The S&P 500 stock index has gone from a record high with stock investors shrugging off the potential economic impact of the virus, to its worst multi-day rout since 2011 in barely one week's time. The virus news dominated the investment markets a week ago, and there was very little other news to counter-act the fear that gripped investors.
Not so in the week ahead.
Friday's monthly data release on the February job market would normally be a focal point for the week. It still will be, but it will be viewed through a different prism thanks to the coronavirus. But the virus will have limited impact on the February statistics. The government collected most of the hiring data before the coronavirus outbreak commanded much attention by the markets.
Still, the jobs data may help cement market expectations regarding how the Federal Reserve may act. A strong employment market should be reassuring to central bankers, allowing them to remain patient about changing its interest rate policy.
Two weeks ago the market was convinced the Fed would keep its target short-term interest rate unchanged when it meets in mid-March. By late February, the bond market was pricing in a 50-50 chance the central bank would cut its borrowing rate to head off any potential economic slowdown caused by the virus.
How the markets, particularly the bond market, react to the employment data will be a window into how deep the fear is about the disease and its potential to infect the American economy.___
ABOUT THE WRITER
Financial journalist Tom Hudson hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter @HudsonsView.
