Wall Street hammered as recession fears grow
Hits circuit breaker third time in last 2 weeks
New York, March 16: Stocks lost more than six per cent on Wall Street Monday as huge swaths of the economy come closer to shutting down due to the coronavirus outbreak, from airlines to restaurants. Emergency actions taken by the US Federal Reserve late Sunday to prop up the economy and get financial markets running smoothly again may have raised fears even further, some investors said.
The selling began immediately on Wall Street, and losses were sharp enough at the open to trigger a temporary trading halt for the third time in the last two weeks. The losses had been even steeper earlier in the morning, and they spread around the world. European stocks and crude oil were down five per cent or more.
The world’s brightest spot may have been Japan, where the central bank announced more stimulus for the economy, and stocks still lost 2.5 per cent.
The spreading coronavirus is causing businesses around the world to shut their doors. While that can slow the spread of the virus, it’s also taking cash out of the pockets of businesses and workers. That has economists slashing their expectations for upcoming months, and JPMorgan Chase says the U.S. economy may shrink at a two per cent annual rate this quarter and three per cent in the April-throughJune quarter. To many investors, that meets the definition of a recession, and the question is how long it will last.
The best-case scenario for many investors is that the economic shock will be steep but short, with growth recovering later this year after businesses reopen. Pessimists, though, are preparing for a longer haul.
Strategists at Goldman Sachs say the S&P 500 could drop as low as 2,000 in the middle of the year, which would be a 41 per cent drop from its record set just a month ago.
Goldman expects the index to rally back to 3,200 at year end.
American Airlines and United Airlines both announced steep cutbacks to flights over the weekend as customers cancel trips and the US government restricts travel. Other travel companies have also seen sharp drops in demand from customers.
Restaurants, movie theaters and other businesses that depend on drawing crowds appear to be next to get squeezed.
Several states and the country’s largest city are ordering restaurants to close their doors to dine-in customers and do only takeout and delivery.
The Federal Reserve has been trying to do what it can to help the economy, and over the weekend it slashed short-term interest rates back to their record low of nearly zero.
The Fed action came as major economies expanded travel curbs and closed more public facilities, raising the cost of efforts to contain the outbreak that has infected nearly 170,000 people worldwide. China, where the coronavirus emerged in December, accounts for about half of those, but a dozen other countries have more than 1,000 cases each.