Virus fears intensify; Dow tumbles
Investors question economic response
NEW YORK – Stocks tumbled again Wednesday as fears about the economic damage from the coronavirus intensified and investors questioned whether any economic response from Washington would be enough – if it happens at all.
The Dow Jones Industrial Average dropped 1,464 points, dragging it 20% below the record set last month and putting it in a bear market. The broader S&P 500 index, which professional investors watch more closely, is a single percentage point away from falling into its own bear market, which would end the longest bull market 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 a bear market was over 55 days in 1987.
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, stocks dove even lower Wednesday after global health officials declared the outbreak a pandemic.
The Dow Jones Industrial Average fell 1,464.94 points, or 5.9%, to 23,553.22; the S&P 500 fell 140.85, or 4.9%, to 2,741.38; and the Nasdaq lost 392.20, or 4.7%, to 7,952.05.
Even a climb in Treasury yields wasn’t enough to turn stocks higher. The yield on the 10-year Treasury rose to 0.87% from 0.75% late Tuesday. That’s a sign of diminished demand for safe investments.
Gold fell $18. to $1,642.30 per ounce, silver fell 18 cents to $16.78 per ounce and copper fell 2 cents to $2.50 per pound. In foreign exchange trading, the dollar fell to 104.56 Japanese yen from 105.14 yen on Tuesday. The euro weakened to $1.1279 from $1.1292.
Investors are calling for coordinated action from governments and central banks around the world to stem the threat to the economy from the virus.
Investors know that lower interest rates or 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 things would be much worse without them.
Besides worries about the virus and the government’s ability to get something done for the economy, the market was also weighed down by a continued decline in oil prices, said Patrick Schaffer, global investment specialist at J.P. Morgan Private 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. That has happened just three other times in history.
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 hard hit. Even Apple, which entered 2020 after making sharp gains, has shed 6% since the beginning of the year as production of iphones in China has been slower to ramp up than expected.
The coronavirus outbreak has moved so fast that its impact has not yet shown up in any nationwide economic data. Many economists still think the U.S. can avoid a recession, particularly if the disease is under control by the early summer. But most also think the odds of recession have risen significantly in recent weeks. Measures of consumer sentiment have fallen sharply since the beginning of the year, a sign that consumers are likely to pull back on spending in the coming weeks.
Trump hinted at plans for tax cuts and other economic relief late Monday, but he has yet to unveil any details. His proposal for a cut to payroll taxes has met resistance on Capitol Hill.
Strategists at Goldman Sachs on Wednesday sharply cut their expectations for earnings growth this year, saying it will lead to the end of the bull market for the S&P 500, which began more than a decade ago.