Stocks fall, capping Wall Street’s worst quarter since 2008
NEW YORK » Stocks fell Tuesday to close out Wall Street’s worst quarter since the most harrowing days of the 2008 financial crisis.
The S&P 500 dropped a final
1.6%, bringing its loss for the first three months of the year to
20% as predictions for the looming recession caused by the coronavirus outbreak got even more dire. Stocks haven’t had this bad a quarter since the last time economists were talking about the worst downturn since the Great Depression, when the S&P 500 lost 22.6% at the end of 2008.
The surge of coronavirus cases around the world has sent markets to breathtaking drops since mid-February, undercutting what had been a good start to the year. Markets rose early in the quarter, and the S&P 500 set a record with expectations that the economy was accelerating due to calming trade wars and low interest rates around the world.
But the virus outbreak abruptly put the clamps on the economy. Benchmark U.S. crude oil dropped by roughly two thirds this quarter amid expectations for weaker demand. The yield on the 10-year Treasury dropped below 1% for the first time as investors scrambled for safety, and it ended the quarter at roughly 0.67%.
Stock markets reflected the gloomy outlook. Germany’s DAX lost a quarter of its value, South Korean stocks fell just over 20% and the Dow Jones Industrial Average of 30 U.S. blue-chip stocks dropped 23.2% for its worst quarter since 1987.
The big question is if markets will get worse. At this point, no one knows.
“People are trying to digest the length and magnitude of what the coronavirus impact is going to be,” said George Rusnak, managing director of investment strategy at Wells Fargo Private Bank.
The steep drops from Tokyo to Toronto in recent weeks reflect investors’ understanding that the economy and corporate profits are in for a sudden, debilitating drop-off. Economies around the world are grinding to near standstills as businesses close their doors and people hunker down at home in hopes of slowing the spread of the virus.
But markets have also cut their losses in recent weeks on hopes that massive aid from governments and central banks around the world can blunt the blow. The S&P 500 was down nearly 31% for the quarter at one point, but it has climbed 15.5% since last Monday.
The Fed has promised to buy as many Treasurys as it takes to get lending markets working smoothly after trading got snarled in markets that help companies borrow short-term cash to make payroll, homebuyers get mortgages and local governments to build infrastructure. Congress, meanwhile, approved a $2.2 trillion rescue plan for the economy, and leaders are already discussing the possibility of another round of aid.