Stocks’ slide evokes 1987 crash
Trading halt 2nd in week; Dow off 10%
NEW YORK — The escalating coronavirus emergency sent the stock market Thursday into its worst slide since the Black Monday crash of 1987, extending a sell-off that has now wiped out most of Wall Street’s big gains since President Donald Trump took office.
The rout took place in a cascade of cancellations and shutdowns across the globe — including Trump’s 30-day suspension of most travel to the U.S. from Europe — and rising worries that the White House and other authorities around the world are unable to rally around ways to counter the economic damage from the outbreak any time soon.
Stocks fell so fast on Wall Street at the opening bell that they triggered an automatic, 15-minute trading halt for the second time this week.
The so-called circuit
breakers were first adopted after the 1987 crash, and until this week hadn’t been tripped since 1997.
The S&P 500 plummeted 9.5% to 2,480.64, for a total drop of 26.7% from its all-time high, set just last month. That puts it way over the 20% threshold for a bear market, officially ending Wall Street’s unprecedented bull-market run of nearly 11 years. The Dow Jones Industrial Average sank 2,352 points, or 10%, to close at 21,200.62, its heaviest loss since its nearly 23% drop on Oct. 19, 1987.
The Nasdaq dropped 750.25 points, or 9.4%, to 7,201.80. The Russell 2000 index of smaller company stocks gave up 141.39 points, or 11.2%, to 1,122.91. The yield on 10-year Treasury notes rose 1 basis point to 0.82%, up from 0.68% two days earlier. Normally when stock markets plunge, bond yields also fall as investors buy more of them. Yields move in the opposite direction of prices.
West Texas Intermediate crude declined 5.8% to $31.07 a barrel.
“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 hit Main Street to a more significant degree,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
The Dow briefly turned upward and halved its losses at one point in the afternoon after the Federal Reserve announced that it would step in to ease “highly unusual disruptions” in the Treasury market. But the burst of momentum quickly faded.
Just last month, the Dow was boasting a nearly 50% increase since Trump took the oath of office on Jan. 20, 2017. By Thursday’s close, the Dow was clinging to a 6.9% gain, though it was still up nearly 16% since just before Trump’s election in November 2016.
The Dow officially went into a bear market on Wednesday, when it finished the day down more than 20% from its all-time high. For the S&P 500, this is the fastest drop since World War II from a record high to a bear market.
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 fallout mounted Thursday, as the NCAA canceled its men’s and women’s basketball tournaments, Major League Baseball postponed opening day, and Disneyland announced it is shutting down until the end of the month. Closer to Wall Street, New York’s Metropolitan Museum of Art, Carnegie Hall and the Metropolitan Opera shut their doors, and Broadway theaters planned to go dark.
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 he remained at loggerheads with Congress on more comprehensive measures.
“What markets are waiting for are efforts to contain the virus in a very aggressive way, ways we’ve seen in other countries,” said Nela Richardson, investment strategist at Edward Jones. “Short of that, nibbling around the edges, maybe doing something that can help a firm with a very short-term impact or help an employee, doesn’t hurt, but it’s not the bull’s-eye, and it’s not as targeted as the markets would like to see.”
Michael McCarthy of CMC Markets said: “The market judgment on that announcement is that it’s too little, too late.”
The damage was worldwide and eye-popping. Among the big moves:
Travel stocks again were among the hardest hit. Norwegian Cruise Line and Royal Caribbean Cruises both lost roughly a third of their value. Another drop for United Airlines put its loss for the year at nearly 58%.
European markets fell 12% in one of their worst days ever, even after the European Central Bank pledged to buy more bonds and offer more help for the economy.
In Asia, stocks in Thailand and the Philippines fell so fast that trading was temporarily halted. Japan’s Nikkei 225 sank 4.4% to its lowest close in four years, and South Korea’s market lost 3.9%.
Also alarming were complaints in recent days by investors that trading in the Treasury market wasn’t working well. For reasons that weren’t immediately clear, traders said they were seeing surprisingly large gaps in prices being offered by buyers and sellers. That threatened to cause the market to seize up.
In a surprise move, the Fed said that it would pump in at least $1.5 trillion to help calm the market and facilitate trading.
After earlier thinking that the virus could remain mostly in China and that any dip in the economy would be followed by a quick rebound, investors are seeing the damage and disruptions mount, with Italy locking itself down, the NBA suspending games and authorities in the U.S. and beyond banning large gatherings and closing schools.
“Anyone who tells you they know how long this is going to last is wrong,” said Adam Taback, chief investment officer for Wells Fargo Private Bank. “The uncertainty here is trying to figure out how you get this virus under control, and is that a matter of days, weeks or months.”
The Institute of International Finance cut its forecast for U.S. economic growth sharply last week, and on Thursday it said things will be even worse because of the surge in oil prices and increasing risk of “credit stress.” As a result, the think tank has raised its projection for the possibility of a recession.
As the coronavirus spreads, policymakers are limited in what they can do to protect the economy, wrote Robin Brooks, the institute’s chief economist, and his colleague Jonathan Fortun. Money is tumbling out of emerging market countries, a sign of investor fear, at a pace not seen even during the 2008 financial crisis, based on the institute’s data.
Information for this article was contributed by Stan Choe, Alex Veiga, Christopher Rugaber and Yuri Kageyama of The Associated Press; by staff members of The New York Times; and by Claire Ballentine, Vildana Hajric, Sarah Ponczek, Sophie Caronello, Min Jeong Lee, Adam Haigh and Anchalee Worrachate of Bloomberg News.