DOW DROPS ANOTHER 13% AFTER TRUMP WARNS RECESSION POSSIBLE
Losses accelerate after statement by Trump
The stomach-turning ride on global financial markets took a dramatic turn Monday with U.S. stocks plunging the most since 1987 after President Donald Trump warned the economic disruption from the virus could last into summer.
The S&P 500 sank 12%, extending losses as Trump said the economy could fall into a recession. Equities opened sharply lower after central bank stimulus around the world failed to mollify investors worried about the damage the coronavirus is inflicting on economies.
The negative superlatives for American stocks are piling up. The S&P wiped out its gain in 2019 and is now down almost 30% from its all-time high. The Dow Jones industrial average lost almost 13%, falling 3,000 points to close at two-year low.
New York — The U.S. stock market plunged 12% Monday for its worst day in more than three decades as voices from Wall Street to the White House said the coronavirus is likely dragging the economy into a recession.
The S&P 500’s drop means it has plummeted nearly 30% since setting a record less than a month ago, and it’s at its lowest point since the end of 2018. Losses were steep Monday, accelerating in the last half hour of trading after President Donald Trump said the economy may be headed for a recession and asked Americans to avoid gatherings of more than 10 people.
The plunge came even though the Federal Reserve rushed to announce a new round of emergency actions before markets opened for trading Monday. The moves are aimed at propping up the economy and getting financial markets running smoothly again, but they may have also raised fears even further. Investors are also waiting for the White House and Congress to offer more aid to an economy that’s increasingly shutting down by the hour.
The Dow Jones Industrial Average plunged 2,997 points, or 12.9%, and likewise the S&P 500 had its worst loss since the Black Monday crash of 1987. It surpassed Thursday’s loss of 10% for the Dow.
The market’s losses the last few weeks are the steepest since the 2008 financial crisis dragged the economy into the Great Recession. Trump and other professional investors say the stock market could bounce back strongly as soon as the health experts get the virus under control. The problem is that no one knows when that could be, and broad swaths of the economy are grinding closer to a standstill in the meanwhile, from parked airplanes to the nearly empty restaurant around the corner.
Monday’s selling began immediately on Wall Street, sharp enough to trigger a temporary trading halt for the third time in the last two weeks. Losses were even sharper in Europe before paring, and major indexes there fell between 4% and 6%. Oil lost 9.5% and has more than halved this year. 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%.
“It’s impossible to say when and how we’re going to reach bottom,” said Danielle DiMartino Booth, chief executive officer of Quill Intelligence.
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 Wells Fargo Securities said Monday it now projects the U.S. economy will fall into a recession in the April-through-June quarter. Joel Prakken, chief U.S. economist at IHS Markit, projects the economy will shrink at a 5.4% annualized rate during the quarter, which would be its worst performance since the depths of the Great Recession.
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.