Stocks have tumbled recently on account of the coronavirus outbreak – or have they?

Last week, stocks tanked on Monday, with the S&P 500 enduring its biggest one-day fall since October. However, the index rebounded strongly on Tuesday, prompting Stuyvesant Capital Management’s Vincent Catalano to ask: “What happened? I must have missed it. Did they find a cure? Or was the disease financialmediaitis: for every effect there must be a cause?”

You cannot analyse the impact of the coronavirus without first examining market technicals. Stocks had gained 15 per cent in less than four months; valuations were elevated, and the S&P 500 had gone 30 consecutive days without back-to-back declines, notes LPL Research, tying the longest such streak in more than 60 years. Even after the sell-off, the S&P 500 remained well above its 50-day moving average, notes Bespoke Investment.

The virus could cause economic upheaval – Apple has warned it could hit earnings, while JPMorgan has lowered its GDP estimates for China – but the outbreak may, as Bloomberg's John Authers noted, be an excuse to sell stocks rather than a reason.