STOCKS PLUNGE AGAIN — ‘IMPOSSIBLE TO SAY’ WHEN THE BOTTOM WILL COME
NEW YORK — The U.S. stock market plunged to its worst day in more than three decades as voices from Wall Street to the White House said the coronavirus may be dragging the economy into a recession.
Monday’s 12% drop for the S&P 500 means it has plummeted nearly 30% since setting a record less than a month ago, and it’s at its lowest point since the end of 2018. Losses were steep Monday, accelerating in the last half hour of trading after President Donald Trump said the economy may be headed for a recession and asked Americans to avoid gatherings of more than 10 people.
The plunge came even though the Federal Reserve rushed to announce a new round of emergency actions before markets opened for trading Monday. The moves are aimed at propping up the economy and getting financial markets running smoothly again, but they may have raised fears even further. Investors are also waiting for the White House and Congress to offer more aid to an economy that’s increasingly shutting down by the hour.
“Despite whipping out the big guns,” the Fed’s action is “falling short of being the decisive backstop for markets,” said Vishnu Varathan of Mizuho Bank in a report. “Markets might have perceived the Fed’s response as panic, feeding into its own fears.”
The Dow Jones Industrial Average plunged 2,997 points, or 12.9%, and, likewise, the S&P 500 had its worst loss since the Black Monday crash of 1987. It surpassed Thursday’s loss of 10% for the Dow.
The market’s losses the last few weeks are the steepest since the 2008 financial crisis dragged the economy into the Great Recession. Trump and professional investors say the stock market could bounce back strongly as soon as health experts get the virus under control.
The problem is that no one knows when that could be, and broad swaths of the economy are grinding closer to a standstill in the meanwhile, from parked airplanes to the nearly empty restaurant around the corner.
Monday’s selling began immediately on
Wall Street, sharp enough to trigger a temporary trading halt for the third time in the last two weeks. Losses were even sharper in Europe before paring, and major indexes there fell between 4% and 6%. Oil lost 9.5% and has more than halved this year. The world’s brightest spot may have been Japan, where the central bank announced more stimulus for the economy, and stocks still lost 2.5%.
“It’s impossible to say when and how we’re going to reach bottom,” said Danielle DiMartino Booth, chief executive officer of Quill Intelligence.
The spreading coronavirus is causing businesses around the world to shut their doors. While that can slow the spread of the virus, it’s also taking cash out of the pockets of businesses and workers. That has economists slashing their expectations for upcoming months, and Wells Fargo Securities said Monday it now projects the U.S. economy will fall into a recession in the April-through-June quarter. Joel Prakken, chief U.S. economist at IHS Markit, projects the economy will shrink at a 5.4% annualized rate during the quarter, which would be its worst performance since the depths of the Great Recession.
The best-case scenario for many investors is that the economic shock will be steep but short, with growth recovering later this year after businesses reopen. Pessimists, though, are preparing for a longer haul. The wide range of possible outcomes has Wall Street swinging wildly, and the S&P 500 had its third straight day where it moved more than 9% — two down and one up.
Strategists at Goldman Sachs say the S&P 500 could fall as low as 2,000 in the middle of the year, which would be a 41% drop from its record set just a month ago. Goldman expects the index to rally back to 3,200 at year end.
American Airlines and United Airlines both announced steep cutbacks to flights over the weekend as customers cancel trips and the U.S. government restricts travel. Other travel companies have also seen sharp drops in demand from customers. Restaurants, movie theaters and other businesses that depend on drawing crowds appear to be next to get squeezed.