Daily Local News (West Chester, PA)
STOCKS SLIDE ON WALL STREET OVER CORONAVIRUS AND OIL CRASH
Stocks went into an alarming slide Monday on Wall Street as a combination of coronavirus fears and a crash in oil prices sent a shudder through the market, triggering the first automatic halt in trading in over two decades so that investors could catch their breath.
The Dow Jones Industrial Average plunged more than 2,000 points at one point during the day, or nearly 8 percent, while interest rates on U.S. bonds sank to alltime lows, a sign that investors expect the economy to be squeezed.
European markets, meanwhile, entered a bear market, registering their heaviest losses since the darkest days of the 2008 meltdown.
“The path of least resistance is still down,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
Two main, intertwined developments dragged down the market:
• The price of oil sank nearly 20% after Russia refused to roll back production in response to virus-depressed demand and Saudi Arabia signaled it will ramp up its own output. While low oil prices can translate into cheaper gasoline, they wreak havoc on energy companies and countries that count on petroleum revenue, including the No. 1 producer, the U.S.
• The coronavirus epidemic mounted, with Italy — the country hit hardest by the coronavirus in Europe — enforcing a lockdown against 16 million people in the north, the heart of its manufacturing and financial industries. The turmoil is expected to push Italy into recession and weigh on the European economy.
On Wall Street, the S&P 500 plunged 7.4% in the first few minutes after the opening bell before trading was halted by the market’s circuit breakers, first adopted after the crash of October 1987 and modified over the years. The market-wide circuit breakers have been triggered only once before, in 1997.
After the 15-minute pause, the S&P trimmed its losses but were still down 7.6% at close. The Dow was down 2,014 points, or 7.8%, to 23,851. The Nasdaq gave up 7.2%.
U.S. stocks edged ever closer to a bear market, defined as a drop of 20% from its peak, while a gauge of fear on Wall Street reached its highest level since the 2008 global financial crisis.
Italy’s stock index plunged 11.2%. Britain, France and Germany were down between 7.7% and 8.4%
The interest rate, or yield, on U.S. Treasury bonds plunged as investors kept on sinking money into seemingly safer places, even as the return on their investment sank closer and closer to zero. The yield on the 10-year Treasury note plunged to 0.52%. Up until last week, it had never been below 1%.
The carnage in the energy sector was particularly bad. With benchmark U.S. crude dropping to under $31 a barrel, Marathon Oil, Apache Corp. and Diamondback Energy each sank more than 40%. Exxon Mobil and Chevron were on track for their worst days since 2008.
“We knew it was going to be a hot day,” said John Spensieri, head of U.S. equity trading at Stifel. He said that the mood was “organized chaos” in the morning but that the trading halt achieved what it was supposed to by stopping the slide.
The coronavirus has infected more than 110,000 people worldwide and killed around 3,900, leading to factory shutdowns, travel bans, closings of schools and stores, and cancellations of conventions and other gatherings. In the U.S., the number of people infected climbed to around 600, with at least 22 deaths.
While the crisis is easing in China, where the virus was first detected, fast-growing clusters have turned up in South Korea, Iran and Italy, and fears are mounting in the United States, where a giant cruise ship idling off the California coast with at least 21 infected people aboard was scheduled to dock in Oakland on Monday so that the thousands on the vessel could be whisked to U.S. military bases or their home countries for a 14-day quarantine.