MARKETS: Oil woes and virus fears send stocks tumbling again.
Continued decline in oil prices adds to Wall Street’s woes
NEW YORK — Stocks tumbled Wednesday as fears about the economic damage from the coronavirus outbreak intensified and investors questioned whether any economic response from Washington will be effective — when and if they see one.
The Dow Jones Industrial Average dropped 1,464 points, bringing it 20% below its record set last month and putting it in what Wall Street calls a “bear market.” The broader S&P 500, which professional investors care more about, is just 1 percentage point away from falling into bear territory and bringing to end one of the greatest runs in Wall Street’s history.
Vicious swings like Wednesday’s are becoming routine as investors rush to sell amid uncertainty about how badly the outbreak will hit the economy. The day’s loss wiped out a 1,167 point gain for the Dow from Tuesday and stands as the index’s second-largest point drop, trailing only Monday’s plunge of 2,013.
With Wall Street already on edge about the economic damage coming from the virus outbreak, stocks dove even lower Wednesday after global health officials declared the outbreak a pandemic.
Investors know that lower interest rates or government spending programs won’t solve the crisis. Only containment of the virus can do that. But such measures could help support to the economy in the meantime, and investors fear things would be much worse without them.
The Bank of England became the latest big central bank on Wednesday to make an emergency interest-rate cut in hopes of blunting the economic pain caused by the virus, which economists call the global economy’s biggest threat.
“Every day that passes makes the economic impact of coronavirus that much worse,” said Kristina Hooper, Invesco’s chief global market strategist.
Besides worries about the virus and the government’s ability to aid the economy, the market was also weighed down by a continued decline in oil prices, said Patrick
Schaffer, global investment specialist at J.P. MorganPrivate Bank.
The speed of the market’s declines and the degree of its swings the last few weeks have been breathtaking.
The Dow Jones Industrial Average has had seven days in the last few weeks where it swung by 1,000 points, including Wednesday. The Dow has done that only three other times in history.
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 existing health problems, it can cause more severe illness, including pneumonia.
The fear is that COVID-19 could drag the global economy into a recession by hitting it from two ends. On the supply side, the worst-case scenario has companies with fewer things to sell as factories shut down and arenas 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.