US stock futures fall with a virus spread, which increases volatility

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(Bloomberg) – US stock futures fell, which slowed last week’s surge more sharply as traders responded to weekend news, including more than 132,000 US coronavirus cases, and warnings that the lockout in the UK was six Could take months.

Contacts to the S & P 500, which expire in June, decreased by 2% to 2,472 from 6:59 p.m. in New York a drop of more than 3% in the first few minutes. The Friday session had a turbulent end: the cash market fell about 3% in the last half hour. The S & P 500 still ended the week growing 10%, the largest in eleven years, fueled by a historic three-day rally.

Dramatic fluctuations were the norm on world markets for five weeks when investors tried to price in an outbreak that brought economies to a standstill, made millions of people unemployed, and brought everything except certain corporate profits to a standstill. The S&P 500 traded almost 17x combined earnings last year, compared to 22x last month.

“We have to get used to the fact that we have high volatility and will have to go through several deep tests before we find one,” said Ed Campbell, portfolio manager and general manager at QMA. “We anticipate a recession. This does not mean that there is no longer a disadvantage from here. Bottoming is a process.”

Whether valuations take into account the prospect of a global recession is the question that traders have to answer. The shares were last traded in a similar multiple four years after the bull market that ended earlier this month. They bottomed out at around 12 in the years following the financial crisis, a level that would require a further 22% decline to reach based on existing earnings estimates for 2020.

Analyst forecasts for individual stocks put together by Bloomberg show that S&P 500 companies will earn $ 161.20 per share this year, which is about 0.3% above the $ 160.60 released for 2019. The 2020 forecast has dropped from $ 174.40 shortly before the markets overrun in mid-February.

Profits in futures would stop at 2,657.50 and fall below 2,403.50 due to volatility limits on the Chicago Mercantile Exchange.

End-of-quarter charges could add to nervousness on Monday and Tuesday, as financial companies restrict lending to secure balance sheets. The MSCI for global equities has dropped about 23% since the beginning of the year, on its way to its worst quarter since the end of 2008.

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