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Why Virgin Galactic Stock Dropped 20% Today

By Rich Smith - Mar 16, 2020 at 4:29PM

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Moves designed to bolster confidence in the economy have failed.

What happened

Shares of space tourism stock Virgin Galactic (SPCE 0.33%) closed 20% lower on Monday, falling back below $12 a share, even though it appears that there was no good reason other than the fact that everything on Wall Street fell today.

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

Aside from that somber observation, there's been no news whatsoever reported by Virgin Galactic today.  

But there has been other news. On Friday, President Trump announced a series of measures designed to shore up the economy. Then on Sunday, the Federal Reserve followed suit, announcing a return of quantitative easing that will feature a dramatic cut in interest rates to nearly zero, combined with as much as $700 billion in asset purchases by the Fed.

These measures, although clearly aimed at boosting confidence in the economy, appear to have had the opposite effect. When combined with news of restaurant closures and air travel bans, they've pretty much convinced investors that the situation we face is grave indeed. And rather than face it, investors are selling their stocks, collecting what winnings that remain to them after the decadelong bull market, and "social distancing" themselves as far away from stocks as they can possibly get.

Now what

Will Virgin Galactic recover from this stock market rout, and retake its highs of February?

Not soon, I fear. The stock is now selling for less than a third of its all-time high hit less than three weeks ago! But Virgin Galactic's high stock price then was predicated upon investors' faith that Sir Richard Branson would soon take the lead in space, and begin flying paying customers in spaceships in just a few months. Now investors seem to be wondering whether people might give up on flying in airplanes!

Until this situation changes, I don't expect to see much change for the better in the situation surrounding Virgin Galactic stock.

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