By Alden Bentley
(Reuters) – U.S. stock index futures tumbled as trading reopened on Sunday night with investors still unnerved by the coronavirus and taking little solace from weekend comments by U.S. officials that aimed to soothe panic about a pandemic.
Senior officials in President Donald Trump’s administration on Sunday tried to reduce concern about a global recession, saying the U.S. public had over-reacted after numerous cases were reported in the country and that stocks would rebound due to the economy’s underlying strength.
S&P 500 e-mini futures <ESc1> were last down about 1%, indicating another bad day for the benchmark index on Monday after it fell more than 11% last week, its worst since the 2008 financial crisis.
The stampede away from risk last week drove investors into assets considered safer than stocks, like gold and government securities. The flight to quality looked set to continue as U.S. 10-year Treasury note futures <TYc1> jumped, pushing the implied yield below 1% for the first time.
That’s a sign traders are worried about growth and expect the Federal Reserve cut interest rates to help restore confidence and cushion the hit from the virus to demand and the flow of goods and people around the world.
“We can expect, perhaps, if this continues through the night, a weaker open. The fact the 10-year yield looks like it may push down is not a good sign for the equity market,” said Quincy Krosby, chief market strategist at Prudential Financial Inc.
On Saturday, China, where the coronavirus first appeared, reported a record contraction in its manufacturing and service sectors because of the outbreak, illustrating the significant impact of the epidemic.
“We need to see more of a peak panic before investors are convinced it’s time to go in,” Krosby said, adding that a recovery in the 10-year yield would be a gauge of steadying sentiment.
Speaking to NBC’s “Meet the Press” on Sunday, Vice President Mike Pence, who is leading the administration’s response to the virus, said that the market “will come back.”
“The fundamentals of this economy are strong. We just saw some new numbers come out in housing and consumer confidence and business optimism. Unemployment is at a 50-year low. More Americans are working than ever before,” Pence said.
When asked on the “Fox News Sunday” program if the American people are over-reacting to the current threat, U.S. Health and Human Services Secretary Alex Azar responded, “Yes, absolutely.”
World Health Organization director-general Tedros Adhanom Ghebreyesus likewise told CNBC on Sunday that the market panic was uncalled for, even after the organization on Friday raised its threat assessment for the virus to its highest level.
Their comments followed those of Federal Reserve chair Jay Powell who also sought to quell fears stoked by China’s dire economic data, flagging that the central bank would take action if necessary to support the economy.
So far around 85,000 people in 53 countries have been infected. China, the world’s second-largest economy, is home to the vast majority of cases. About 70 have been diagnosed in the United States.
A Washington state man in his 50s with underlying health conditions was the first American to die from the virus, officials said Saturday.
(Reporting by Alden Bentley; Editing by Daniel Wallis and Sam Holmes)