The Dow Jones Industrial Average plummeted again Thursday, closing down 2,352.60 points, or about 10%, a day after officially entering a bear market and embarking on its overall worst day since 1987’s Black Monday crash, according to the Wall Street Journal.
Thursday’s rout was fueled by a litany of travel bans and the suspension of sporting and entertainment events around the world due to the coronavirus, but mainly by rising worries that the White House and other global leaders won’t be help the weakening economy recover any time soon.
The Dow’s stunning one-day drop to 21,200.62 came despite the Federal Reserve Bank’s move earlier in the day to prop up short-term Treasury markets, according to several news reports. The index briefly turned upward and halved its losses at one point in the afternoon, but the burst of momentum quickly faded.
The S&P 500 also plummeted 9.5%, for a total drop of 26.7% from its all-time high, set just last month. That puts it way past the 20% threshold to make this a bear market, snapping an unprecedented, nearly 11-year bull-market run.
The Dow suffered a nearly 23% drop on Oct. 19, 1987.
"The news just continues to get worse, and the travel ban puts an exclamation point on the weakness we're going to see in global GDP and, in turn, the U.S.," said Liz Ann Sonders, chief investment strategist at Charles Schwab. “We're starting to get a sense of how dire the impact on the economy is going to be. Each day the news doesn't get better, it gets worse. It's now has hit Main Street to a more significant degree.”
Stocks fell so fast earlier in the day that trading was halted three minutes after the opening bell Thursday at the New York Stock Exchange after a 7% drop, according to news reports.
At that point the Dow was off about 1,800 points, or close to 8%.
The sell-off bludgeoning financial markets around the world got even worse Thursday as the economic pain caused by the coronavirus became more painfully clear.
On Wednesday, the Dow finished the day down more than 20% from its all-time high, set just last month, officially entering what is known as a bear market for the first time in over a decade.
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In a somber prime-time address Wednesday night from the White House, Trump announced the new travel ban as well as measures to extend loans, payroll tax cuts and other financial relief to individuals and businesses hurt by the crisis.
But the travel restrictions represented another heavy blow to the already battered airline and travel industries, and the other measures did not impress Wall Street.
The combined health crisis and retreat on Wall Street heightened fears of a recession.
“This is bad. The worst and fastest stock market correction in our career," Chris Rupkey, chief financial economist at MUFG Union, said in a research note overnight. "The economy is doomed to recession if the country stops working and takes the next 30 days off. The stock market knows it.”
The damage was worldwide and eye-popping. European stocks tumbled 8%, even after the European Central Bank pledged to buy more bonds and offer more help for the economy. In Thailand and the Philippines, stocks fell so fast that trading was temporarily halted. Japan’s Nikkei 225 sank to its lowest close in four years.
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Not only has the degree of the market’s drop in recent weeks been breathtaking, so has its speed. If the S&P 500 remains under 2,708.92, which looks likely, it would be the fastest that the index has fallen from a record to a bear market since World War II, according to CFRA.
It was just two days ago that the S&P 500 soared nearly 5% amid hopes that big stimulus from the U.S. government could arrive soon to help cushion the economic blow from the virus. Trump’s pitch for a cut in payroll taxes has hit resistance on Capitol Hill, though, and hopes dissipated after Trump’s Wednesday remarks from the Oval Office, where he blamed the “foreign virus.”
Thailand's benchmark plunged 10% in the afternoon session, triggering a 30-minute halt to trading. It fell further after trading resumed, losing 11%. The Philippine market lost 10%, also resulting in a trading halt. In both cases the declines were the worst single-day losses since the 2008 financial crisis.
India's Sensex swooned 8.6%.
With the markets still falling, "we haven't seen, you know, a significant buy-in interest yet, so traders are still in the get-out mode. They just want to have it in cash," said Jackson Wong of Amber Hill Capital Ltd., in Hong Kong.
"So that's a typical panic mode, but whether this panic mode will stop in the short term, it really will depend on how the virus incident goes forward," Wong said.
Credit: AJC
Wednesday's 1,464.90-point loss for the Dow wiped out its 1,167-point gain from Tuesday and stands as the index's second-largest point drop, trailing only Monday's plunge of 2,013.
Investors would like to see coordinated action from governments and central banks to stem the threat to the economy from the virus. Lower interest rates and government spending won't solve the crisis — only containment of the virus can — but they can spur business activity and help prop up demand.
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"The sheer speed and the size of the falls we've seen and the huge volumes of shares exchanging hands here and around the globe tells us that we're not at the end of this as yet and we're likely to see further damage over the coming days and weeks," McCarthy said.
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus, but the fear is that the global economy could tip into a recession, with slowdowns in production and a plunge in business activity as people stay home instead of traveling, shopping or dining out.
Many analysts expect markets to swing sharply until the number of new infections stops accelerating. In the United States, the number of cases has topped 1,000. Worldwide, more than 126,000 people have been infected, and over 4,600 have died.
Treasury yields, one of the loudest alarm bells on Wall Street about the economic risks of the crisis, remain well below 1%, with the yield on the 10-year Treasury at 0.74% from 0.83% late Wednesday. That's a sign of diminished demand for safe investments.
Strategists at Goldman Sachs on Wednesday sharply cut their expectations for earnings growth this year, saying it will lead to the end of the bull market for the S&P 500, which began more than a decade ago. It said it expects the drawdown to be brief, however, as earnings rebound later in the year.
A plunge in crude prices has wiped out profits for energy companies, while record-low Treasury yields are squeezing the financial sector. Strategists say S&P 500 earnings per share could fall enough to drag the index down to 2,450 in the middle of the year. That would be a nearly 28% drop from its record.
In other trading, benchmark U.S. crude lost $1.64 to $31.35 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.38 to $32.98 per barrel on Wednesday. Brent crude, the standard for international pricing, gave up $1.76 to $34.03 per barrel.
The dollar weakened to 103.78 Japanese yen from 104.53 yen on Wednesday. The euro inched down to $1.1239 from $1.1271.
— ArLuther Lee contributed to this report for The Atlanta Journal-Constitution.
