Market rout deepens on virus fears

The Dow Jones Industrial Average sank nearly 1,200 points Thursday, deepening a weeklong global market rout caused by worries that the coronavirus outbreak will wreak havoc on the global economy.

Bond prices soared again, sending the yield on the 10year Treasury to another record low. When yields fall it’s a sign that investors are feeling less confident about the strength of the economy going forward.

“People can demand things that feel safe for irrational amounts of time,” said Katy Kaminski, chief research strategist at AlphaSimplex Group. “It doesn’t matter, the fundamentals, when people are worried.”

The latest losses extended a slide in stocks that has wiped out the solid gains the major indexes had posted early this year.

The S&P 500 is now 12 per cent below the all-time high it set just a week ago. This is now the stock market’s worst week since October 2008, when Wall Street was mired in the financial crisis.

Investors came into 2020 feeling confident that the Federal Reserve would keep interest rates at low levels and the U.S.-China trade war posed less of a threat to company profits after the two sides reached a preliminary agreement in January. The virus outbreak has upended that rosy scenario.

The S&P 500 index’s sharp decline from its last record high puts it in what market watchers call a “correction,” a normal phenomenon that analysts have said was long overdue in this bull market, which is the longest in history.