Into bear territory

After another day of wild swings, broader S&P 500 is also on the brink of slipping into bear territory.

The Dow’s decline from its recent high hits 20%; the S&P 500 is on the brink.

Stocks on Wall Street careened downward Wednesday, with the Dow Jones industrial average sinking more than 1,400 points, as investors became more fearful that the Trump administration and other global governments won’t be able to prevent the coronavirus outbreak from doing significant damage to the worldwide economy.

The Dow’s loss dragged it 20% below the record high it set last month, putting the index in bear market territory. The broader Standard & Poor’s 500 index, which professional investors watch more closely, is down 19% from its peak — a single percentage point away from falling into its own bear territory. If it slips that bit further, that would end one of the longest bull markets in Wall Street history.

The decline has been one of the swiftest sell-offs of this magnitude. The fastest the S&P 500 has ever fallen from a record into bear territory was over 55 days in 1987.

Vicious swings such as Wednesday’s are becoming routine as investors rush to sell amid uncertainty about how badly the virus will hit the economy. The Dow’s 5.9% drop more than erased its Tuesday leap. The 1,465point decline stands as the index’s second-largest point drop, trailing only Monday’s 2,013-point plunge.

With Wall Street already on edge about the economic damage coming from the virus, stocks sank Wednesday after the World Health Organization called the outbreak a pandemic.

Investors are calling for coordinated action from governments and central banks around the world to stem the threat to the econo

my. But doubts are rising about what can come from the U.S. government, even after President Trump promised some aid.

Investors know that lower interest rates and government spending programs alone will not solve the crisis. Only the containment of the virus can do that. But such measures could help support the economy in the meantime, and investors fear that things would be much worse without them.

On Wednesday, the Bank of England became the latest big central bank to make an emergency interest rate cut in hopes of blunting the economic pain caused by the virus.

“The government probably should have been thinking about stimulus last month,” said Kristina Hooper, Invesco’s chief global market strategist. “Every day that passes makes the economic impact of coronavirus that much worse.”

Many investors are worried that a divided Congress will have trouble agreeing to any plan, she said.

The market was also weighed down Wednesday by a continued decline in oil prices, said Patrick Schaffer, global investment specialist at J.P. Morgan Private Bank.

“I want all retail investors to expect this environment will continue: sharp down days, sharp up days,” he said. “This feeling of whiplash that people feel probably continues for some period of time.”

The speed of the market’s recent declines and the degree of its swings have been breathtaking. In the last few weeks, the Dow has had seven days on which it swung by 1,000 points. A point swing that big has happened just three other times in history.

That said, the percentage changes — while big — have been less dramatic when measured against historical swings. As the index has climbed, 1,000 points has made up a smaller and smaller percentage.

For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with preexisting health problems, it can cause more severe illness, including pneumonia.

The vast majority of people recover from the new virus, but the fear is that it could drag the global economy into a recession by hitting it from both sides: supply and demand.

On the supply side, the worst-case scenario has companies with fewer things to sell as factories shut down and workplaces dim the lights because workers are out on quarantine. On the demand side, companies see fewer customers because people are huddling at home instead of taking trips or going to restaurants.

United Airlines has lost more than a third of its value since Feb. 21 because many people don’t want to risk flying. Cruise lines have also been hit hard. Even Apple, which made sharp gains in 2019, is down 6% from the beginning of the year as production of iPhones in China has been slower to grow than expected.

The coronavirus outbreak has moved so fast that its effects have not yet shown up in any nationwide economic data. Many economists still think the U.S. can avoid a recession, particularly if the virus is under control by the early summer.

But most also think the odds of recession have risen sharply in recent weeks. Measures of consumer sentiment have dropped since the beginning of the year, a sign that consumers are likely to pull back on spending in the coming weeks.

Many analysts say financial markets will continue to swing sharply until the number of new infections stops accelerating. In the United States, the number of cases has topped 1,200. Worldwide, more than 125,000 people have been infected, and more than 4,600 have died.

“There’s a real feeling that we don’t know where this ends,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.