U.S. stocks are on track for their worst week since October 2008 as the spreading coronavirus threatens to derail the global economy.
Fed suggests possible rate cut amid coronavirus outbreak
Stocks sank again Friday after another wild day on Wall Street, extending a rout that handed the market its worst week since October 2008 at the height of the financial crisis.
The market clawed back much of its intraday losses in the last 15 minutes of trading as some buyers emerged, keeping the indexes from another steep plunge.
The Dow Jones Industrial Average swung back from an early slide of more than 1,000 points to close around 350 points lower. The S&P 500 fell 0.8%, while the Nasdaq reversed an early decline to finish flat.
The market’s losses moderated somewhat after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in midMarch.
Bond prices soared again as investors sought safety and became more pessimistic about the economy’s prospects. That pushed yields to more record lows. The yield on the 10-year Treasury note fell sharply, to 1.14% from 1.30% late Thursday. That’s a record low, according to TradeWeb. That yield is a benchmark for home mortgages and many other kinds of loans.
Global financial markets have been rattled by the outbreak that has been shutting down industrial centers, emptying shops and crimping travel all over the world.
More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.
More employers told their workers to stay home, and officials locked down neighborhoods and closed schools. The efforts to halt the spread of the illness threatened jobs, paychecks and profits.
“This is a case where in economic terms the cure is almost worse than the disease,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics. “When you quarantine cities you lose economic activity that you’re not going to get back.”
The rout has knocked every major index into what market watchers call a “correction,” or a fall of 10% or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.
The list of countries touched by the illness climbed to nearly 60 Friday as Azerbaijan, Belarus, Iceland, Lithuania, Mexico, the
Netherlands, New Zealand and Nigeria reported their first cases.
More than 83,000 people worldwide have contracted the illness, with deaths topping 2,800.
The head of the World Health Organization announced the risk of the virus spreading worldwide was “very high,” citing the “continued increase in the number of cases and the number of affected countries.”
Economists have forecast global growth will slip to 2.4% this year, the slowest since the Great Recession in 2009, and down from earlier expectations closer to 3%.
But if coronavirus, known officially as COVID-19, becomes a global pandemic, economists expect the impact could be worse, with the U.S. and other global economies falling into recession.
“All this says to us is that there are still a lot of worries in the market,” said Gene Goldman, chief investment officer at Cetera Financial Group. “We need the Fed to come out and say basically guys, we got your back.”
Traders have been growing more certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon. Goldman said the Fed’s current lack of action amounts to a tightening of rates compared with other nations and their actions to offset the impact of the coronavirus.
The damage from a week of almost relentless selling was eyepopping: The Dow fell 3,583 points, or 12.4%. Microsoft and Apple, the two most valuable companies in the S&P 500, lost a combined $300 billion. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16%.