From Yahoo:
The market is fighting like hell to rebound on Tuesday after the coronavirus fueled rout on Monday that saw the Dow Jones Industrial Average crash more than 1,000 points.Investors would be wise to proceed with caution and not get sucked into the proverbial dead cat bounce in stocks in the near-term, however. Because let’s face it, the unpredictable coronavirus is having a major impact on Corporate America and it could get worse in the weeks ahead. How bad can financials of companies get?Well, the strategy team at investment bank Jefferies attempts to unpack the situation, listing several worse-case scenarios:
- Companies may be forced to cut prices to clear product, which is deflationary and not favorable to profit margins (and profits).
- Unsold inventory raises the potential for working capital issues. In other words, badly needed cash may be trapped in stores and warehouses.
- Companies may face solvency issues if they cannot clear inventory quickly enough. That could trigger a ripple effect throughout credit markets.
Jefferies doesn’t lay out what this worse-case scenario would mean to specific stocks or the broader market. But this should be the analysis investors do right now on companies they own — Wall Street is doing the same, and could be poised to slash ratings, price targets and profit estimates in the weeks ahead. That could very well unleash a fresh wave of selling pressure in the markets....MORE
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