Stock prices fall amid virus fears, oil-price crash
Stocks took their worst one-day beating on Wall Street since the global financial crisis of 2008 as a collapse in oil prices Monday combined with mounting alarm over what the coronavirus could do to the world economy.
The staggering losses, including a 7.8 tumble in the Dow -ones Industrial Average, immediately raised fears that a recession might be on the way in the U.S. and that the record-breaking 11-year bull market on Wall Street may be coming to an abrupt end in a way no one even imagined Must a few months ago.
The drop was so sharp that it triggered the first automatic halt in trading in more than two decades. (uropean stock indexes likewise registered their heaviest losses since the darkest days of the 2008 meltdown and are now in a bear market.
Together, the sell-offs reflected growing anxiety over the potential global economic damage from the coronavirus, which has infected more than 110,000 people worldwide and killed about 4,000 while prompting factory shutdowns, travel bans, closings of schools and stores, and cancellations of conventions and celebrations big and small.
“The market has had a
crisis of confidence,” said :illie elwiche, investment strategist at %aird.
The market slide came as Italy, the hardest-hit place in (urope, began enforcing a lockdown against million people in the north, or one-Tuarter of the country’s population, and then announced that travel restrictions would be e tended nationwide. 3remier iuseppe &onte said all people will have to demonstrate a valid reason to travel beyond where they live.
The turmoil in Italy marked by masked police officers and soldiers checking travelers’ documents and restrictions that affected such daily activities as enMoying
an espresso at a cafe counter or running to the grocery store is e pected to push the country into recession and weigh on the (uropean economy.
(lsewhere around the world, Ireland went so far as to cancel St. 3atrick’s ay parades, and Israel ordered all visitors Tuarantined Must weeks before 3assover and (aster, one of the busiest travel periods of the year.
In the 8.S., a cruise ship with a cluster of coronavirus cases that forced it to idle off the &alifornia coast for days docked at Oakland as officials prepared to start bringing passengers to military bases for Tuarantine or return them to their home countries. The rand 3rincess had more than , people aboard, of them infected.
The market was also dragged down by another, intertwined development Oil prices plunged nearly % after Russia refused to roll back production in response to virus-depressed demand and Saudi Arabia signaled it will ramp up its own output.
:hile low oil prices can translate into cheaper gasoline, they wreak havoc on energy companies and countries that count on petroleum revenue, including the 1o. producer, the 8nited States.
“3eople are very an ious and very uncertain. Then all of a sudden you throw in a wild card that we weren’t e - pecting and people Must went, CAh ’” said Randy )rederick, vice president of trading derivatives at &harles Schwab.
He added “A recession and a bear market are both a very realistic possibility right now.”
“The fear today is Are the bears correct in talking about a recession around the corner from this ” said 4uincy .rosby, chief market strategist at 3rudential )inancial. “Is this Must about now Is this Must about the oil Is this Must about the virus Or are we looking at a recession around the corner because all of this ”
3resident onald Trump met in the afternoon with Treasury Secretary Steven Mnuchin, economic adviser arry .udlow and other aides about a range of economic actions he could take. He also invited :all Street e ecutives to the :hite House on :ednesday to discuss the economic fallout from the epidemic.
At a :hite House press briefing Monday night, Trump said his administration will ask &ongress to pass payroll ta relief and other Tuick measures aimed at easing the impact of the coronavirus on workers. ow, S 3 and 1asdaT futures were up more than . % following the remarks.
Asked about the danger of a 8.S. recession, Mnuchin said at the :hite House briefing that the 8.S. economy is resilient.
“This is not like the financial crisis where we don’t know the end is in sight,” Mnuchin said. “This is about providing proper tools and liTuidity to get through the ne t few months.”
On :all Street, the drop
in the S 3 triggered an automatic -minute market-wide trading halt by falling 7.4% in the first few minutes after the opening bell. The so-called circuit breaker has been triggered only once before, in 7.
The S 3 closed with a loss of 7. %, its biggest one-day drop since ec. , . The ow was down , points, or 7. %, to , . The 1asdaT gave up 7. %.
The S 3 has fallen . % from the record high it set on )eb. and has lost . trillion in value during that time. 8.S. stocks are now uncomfortably close to entering a bear market, defined as a drop of % from their peak.
Italy’s stock inde plunged . %. %ritain, )rance and ermany were down between 7.7% and .4%
The interest rate, or yield, on 8.S. Treasury bonds fell to all-time lows as investors looking for a safe place kept on putting money into them, even as the return on investment sank closer and closer to ero. The yield on the - year Treasury note plunged to . %. 8p until last week, it had never been below %.
The carnage in the energy sector was particularly bad. :ith benchmark 8.S. crude dropping to under a barrel, the stock of Apache &orp. and Occidental 3etroleum lost more than half its value. ( - on Mobil had its worst day since , while &hevron had its second-biggest drop ever.
“:e knew it was going to be a hot day,” said -ohn Spen
sieri, head of 8.S. eTuity trading at Stifel. He said that the mood was “organi ed chaos” in the morning but that the trading halt achieved what it was supposed to by stopping the slide.
espite the scary-looking red numbers flashing on &1%& and other news channels, some financial consultants advised ordinary investors to stick to their long-term plan and not panic.
Scott Heydt, a financial consultant at Heydt Air, said he e pects the market will go back to normal, even though it could take a year or so. “It’s definitely not a comfortable time,” he said. “%ut people need to stop looking at their portfolios on their smartphones every two seconds if they don’t have a stomach for it.”
)or most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. )or some, especially older adults and people with e isting health problems, it can cause more severe illness, including pneumonia. The vast maMority of people recover from the virus, as has already happened with about three-Tuarters of those infected in &hina.
:hile the crisis is easing in &hina, where the virus was first detected, fast-growing clusters have turned up in South .orea, Iran and Italy, and the caseload is growing in the 8nited States. The number of people infected in the 8.S. climbed to around , with deaths, at least of them associated with a single Seattle-area nursing home.
After initially taking an optimistic view on the virus, hoping that it would remain mostly in &hina and cause Must a short-term disruption, investors are reali ing they probably underestimated the crisis badly.
Traders are increasingly betting the )ederal Reserve will cut interest rates back to ero to help the virus-weakened economy. %ut doubts are rising about how effective lower rates can be this time. They can encourage people and companies to borrow, but they can’t restart factories, restaurants or theme parks shut down because people are Tuarantined.
The )ed has already cut its benchmark short-term rate to a range of % to . %, leaving little room to cut more.
“&entral banks are a bit player in the current crisis,’’ (than Harris, global economist at %ank of America, wrote in a research report.
The clamor is growing louder for help from authorities besides central banks.
“Today’s market action may bang some heads together and actually start thinking about the constructive measures the government can take,’’ said -acob .irkegaard, senior fellow at the 3eterson Institution for International (conomics.
Among other things, .irkegaard said, the government should make sure all Americans get paid sick leave and health care coverage for virus-related ills.