Michigan businesses take beating as US stocks have worst week since 2008
The U.S. stock selloff delivered the market's worst week since 2008 as the World Health Organization on Friday raised its global threat level to "very high," its most extreme assessment, and more cases of the coronavirus appeared in California, Asia and Europe.
After its largest decline on Thursday since 2011, the Dow Jones Industrial Average lost another nearly 357 points, or 1.4%. The S&P 500 slid 0.8%, closing down almost 25 points. The tech-heavy NASDAQ, however, was able to buck a 3% decrease earlier in the day to squeeze out a less than 1-point increase, or 0.01%, after the Federal Reserve indicated it could intervene if the economy needs it. The Fed could cut rates at its next policy meeting in mid-March.
Major publicly traded companies in Michigan took a beating from the selloff. Their shares prices dropped on average 12% between Feb. 21's close and Friday, according to an analysis by The Detroit News. Over the past week, the Dow dropped 12.4%, the S&P 500 feel 11.5% and the NASDAQ was down 10.5%.
The declines are a precautionary measure as the market attempts to forecast the unclear implications of the respiratory illness, said Nejat Seyhun, a finance professor at the University of Michigan's Ross Business: "I think we were just too comfortable. There were new records ... while the rest of the world is suffering. That was a surprise."
In Michigan, American Axle & Manufacturing Holdings Inc. led the decline this week with its shares falling 20.9%, though its price was up 2.6% at the end of Friday. The Detroit auto supplier earlier this month said it predicted the outbreak would cost approximately $25 million. A company representative declined to comment on the stock price.
"These are industrial, transportation companies," Seyhun said of Michigan's major public businesses like American Axle. "They are typically what you call cyclicals. If coronavirus comes to the U.S. in a significant way, it affects their business activity more than the average. The cyclicals are more sensitive to the business cycle."
Pending corporate tie-ups may have helped some companies prove more resilient to the swings. Taubman Centers Inc.'s shares slid just 2.2% over the past week. Indiana's Simon Property Group said earlier this month it was acquiring the Bloomfield Hills real estate investment trust and owner of Twelve Oaks Mall in Novi and Great Lakes Crossing in Auburn Hills in a deal that is expected to close in the middle of the year.
Meanwhile, Fiat Chrysler Automobiles NV's shares were down just 5% over the same time period, benefiting this week from news that French automaker Groupe PSA had posted record profits in 2019. The automakers have signed a binding agreement to merge with PSA CEO Carlos Tavares at the helm in a deal expected to take a year or so to close.
Across town, General Motors Co.'s shares dropped 12% and Ford Motor Co.'s fell 11.8% this week, dropping to Ford's lowest since 2009. Jim Farley, incoming chief operating officer, said this week, the coronavirus would negatively affect the Dearborn automaker's guidance.
Other shares with large declines included Detroit's DTE Energy Co. at 17.2%, Grand Rapids' lumber company UFP Industries Inc. at 17.1% and auto components supplier Cooper-Standard Holdings Inc. at 16.1%.
For the week, Midland chemical company Dow Inc.'s shares fell 14.9%, Benton Harbor appliance manufacturer Whirpool Corp.'s dropped 12.3%, Ann Arbor-based Domino's Pizza Inc.'s were down 8.7% and Battle Creek food manufacturer Kellogg Co.'s decreased 7.7%.
Although the falling stock prices have jolted retirees and those dependent on the market for income, it has yet to make a major impact on consumer sentiment. The University of Michigan's monthly index increased in February, nearly matching the 11-year expansion peak set in March 2018.
Of all consumers surveyed, 8% mentioned the coronavirus when describing the reasons for their economic expectations. That number jumped to 20% on Monday and Tuesday, the final days of the survey, as the Centers for Disease Control and Prevention said it could have a significant impact on the United States and equity prices dropped.
"The good part is the consumer confronting the coronavirus is very confident," said economist Richard Curtin, the survey's director. "They can still lose some optimistic views and still be positive about the economy." However, with 60% of consumers invested in the stock market for retirement-related accounts, "they may be less interested in spending an extra dollar rather than saving it."
Still, while stocks may have retreated from record highs in January, the S&P 500 remains up 5% from a year ago.
"A 13% drop in the past 9 days is unnerving, but it is important for individual investors not to panic," said Greg McBride, chief financial analyst for Bankrate.com, in a statement. "Staying the course in the face of volatility is the proven path to reaching your long-term financial goals.”