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Photo: Anthony Wallace/AFP via Getty Images

Worries are growing that the economic impact from the novel coronavirus outbreak will be worse than expected and that markets are being too complacent in factoring it in as a risk.

What's happening: The number of confirmed cases has already far outpaced expectations and even those reports are being viewed through a lens of suspicion that the Chinese government is underreporting the figures.

  • Yet, U.S. stock indexes have continued to hit all-time highs, bond spreads remain compressed, and even some Asian bourses have recouped losses that followed the initial coronavirus headlines.

Driving the news: Of the 364 companies that have held Q4 earnings calls, 138 cited the term “coronavirus” during the call, and about 25% of those included some impact from the coronavirus or modified guidance due to the virus, according to FactSet.

  • Apple was the latest, saying Monday it would not meet quarterly revenue expectations due to limited iPhone production and Chinese demand.

What they're saying: "This will eventually end badly. I have never in my career seen anything as crazy as what’s going on right now," Scott Minerd, global CIO of Guggenheim Investments, writes in a note. "The cognitive dissonance in the credit market is stunning."

He's not alone: "The ramp up in China will take much longer than many expect because of the need to prevent a secondary flare up in contagion," Diane Swonk, chief economist at Grant Thornton, said on Twitter.

The state of play: "By most estimates, if the Chinese extend the lunar new year by two weeks it would not meaningfully impact the global supply chain, but if it went beyond two weeks then we would start to see problems for materials and consumer goods outside of China," Minerd argues.

Between the lines: It's been about two weeks and things don't look great.

  • Hong Kong, already coping with the economic damage from its months-long protests, now is facing wide-ranging shortages of basic household and cooking supplies.
  • High-tech industrial parks in Chinese manufacturing hubs like Shenzhen have just reopened but are facing a "severe" worker shortage, as many are stuck in their hometowns and factories remain idle.

Details: Minerd predicts that the "impact of all this on corporate profits and free cash flow will be dramatic," warning that China's first quarter GDP could fall as low as -6% annualized in the first quarter and oil could drop to $25 a barrel.

The bottom line: "We are either moving into a completely new paradigm, or the speculative energy in the market is incredibly out of control," Minerd says.

  • "I think it is the latter. I have said before that we have entered the silly season, but I stand corrected. We are in the ludicrous season."

Go deeper: Apple will miss quarterly earnings estimates due to coronavirus

Go deeper

42 mins ago - World

At least 2 dead after Tonga volcano eruption and tsunami

A satellite image of the explosive eruption of the Hunga Tonga-Hunga Ha'apai volcano on Saturday. Photo: UNICEF/NOAA

At least two people are confirmed to have died in Tonga following the undersea volcanic eruption that sent tsunami waves toward the island nation and across the Pacific over the weekend, officials said Monday.

The big picture: Officials reported major damage along the western coast of the main island of Tongatapu, where the capital, Nuku'alofa, was covered in ash and dust, including on the runway of the airport. A New Zealand Ministry of Foreign Affairs spokesperson told Axios over the phone that two people had been confirmed to have died in the disaster.

Airlines call for Biden admin's "immediate intervention" in 5G deployment

Photo: Tayfun Coskun/Anadolu Agency via Getty Images

The CEOs of leading U.S. air cargo and passenger carriers on Monday warned the Biden administration there could be "catastrophic disruption" after AT&T and Verizon deploy a new 5G service this week.

Driving the news: They said in a letter to Transportation Secretary Pete Buttigieg and other top federal officials ahead of the C-Band 5G service's deployment Wednesday that "the nation's commerce will grind to a halt" and "could potentially strand tens of thousands of Americans overseas."

Updated 5 hours ago - Energy & Environment

Thousands without power as "hazardous" winter storm lashes East Coast

Satellite imagery of the Northeastern U.S. taken by NOAA on Jan. 17. Photo: NOAA

A major winter storm lashed much of the East Coast Sunday and Monday, causing widespread power outages and disrupting travel over the holiday weekend.

The latest: Authorities in North Carolina confirmed that two people died in a car crash and that they responded 600 vehicle accidents during the storm on Sunday, per the Washington Post.

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