Stocks drop as week of wild trading closes out
Wall Street was gripped by another wave of worry over the spreading coronavirus on Friday. Stocks tumbled, investors rushed into the safety of government bonds, and oil prices nose-dived.
Financial markets have traded wildly for more than two weeks, as investors have tried to come to grips with the sudden rise in the number of virus cases, and the threat to the economy posed by measures to contain them.
Friday was no exception. The S&P 500 fell nearly 4% at its lowest point before recovering those losses and ending down less than 2%.
The Dow Jones Industrial Average lost 256.50, or 1%, to 25,864.78. The Nasdaq fell 162.98, or 1.9%, to 8,575.62.
Declines came from Apple, which fell 1.3%, to close at $289.03 a share; Facebook, down by 2.2% on the day to close at $181.09; Netflix, which gave up 1%, to close at $368.97; Intel, down 2.1%, to fin
ish at $55.7 a share, and Tesla, which saw its shares give up 3% to end the day at $703.48.
Some local companies took more steps to try to reduce the spread of coronavirus around the region. Both Facebook and Apple have told their employees to work from home, if possible, with Facebook cancelling all of its upcoming Bay Area events and also clamping down on business travel by its employees.
Perhaps the most notable move in financial markets was a slide in yields on government bonds to levels that would have been considered unthinkable just two weeks ago. The yield on the 10-year Treasury note fell to as low as 0.68% in early trading Friday. Such a steep drop reflects near panic, analysts said, given that there was little news overnight.
Oil prices slid 10% as the world’s major producers failed to reach an agreement to reduce production as demand falls.
A strong report on the
American job market on Friday did little to assuage investors concerns. Employers added 273,000 jobs in February, but the data is a snapshot of a point when the prevailing sentiment was that the United States would remain relatively unaffected by the coronavirus.
Nor did it help that President Donald Trump signed a $8.3 billion emergency spending bill aimed at funding efforts to contain the spread.
The downdraft already reflects a growing recognition that the Federal Reserve on its own will not be able to offset drags on the
economy from the spreading coronavirus. The central bank already cut rates by a half point this week, and investors expect the Fed to do so again at its meeting later in March.
“The most essential policy response is the public health one — testing, treatment, quarantine, contact tracing, social distancing, lockdown,” John Normand, a cross asset strategist at JPMorgan Chase, wrote in a note Friday.
Economists on Wall Street have slashed growth forecasts for this year, and warned the economy could at least briefly slip into recession,
over rising fear of the effects of the virus on supply chains, tourism and other economic activity. Analysts said on Friday that the Fed would be unlikely to offset that damage on its own.
“The Fed’s emergency rate cut this week made it clear that officials are taking the economic risks posed by the coronavirus outbreak seriously,” analysts at Capital Economics said in a note Friday. “But with the number of new cases rising sharply, we don’t think lower interest rates will prevent activity growth from slowing over the next few months.”
For many, the question now is how much damage the virus can do to the global economy and growth prospects for the year.
The uncertainty over that impact has triggered big swings in the market. Although it ended Friday with a loss, big gains on Monday and Wednesday meant that the S&P 500 was actually slightly higher for the week.
Still, investors have plenty to worry about. Factories in China are still struggling to get back up and running. Thousands of flights around the world
have been grounded. Supply chains have been snarled, shaking some of the world’s biggest companies and forcing an untold number of workers to stay home.
“Against this backdrop, we should prepare for a short-term but severe global recession,” said Nigel Green, chief executive of deVere Group, an investment firm.
Shares in Europe and Asia were also sharply lower, with benchmarks in Britain, Germany and France down more than 3%. In Tokyo, Hong Kong and Seoul, markets closed more than 2% lower.
The jobs report shows a burst of hiring before the coronavirus outbreak.
For the second month in a row, the United States economy churned out a blockbuster number of jobs, the government reported Friday, an impressive showing in an era of slow-and-steady employment growth.
Employers added 273,000 jobs in February. Analysts had expected a gain of about 165,000, according to MarketWatch.
But with the coronavirus outbreak shaking economic confidence, the solid showing may not be a harbinger of continued strength.
Every jobs report looks backward, but February’s report captures a particularly unusual moment before the market was gripped with anxiety about the global impact of a widening epidemic.
“There is a red line in the calendar,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The value of it is that this report gives us kind of a benchmark of where we were before things began to go wrong.”
In Europe, the French CAC 40 dropped 4.1%, and the German DAX lost 3.4%. The FTSE 100 in London fell 3.6%.
Japan’s Nikkei 225 fell 2.7%, South Korea’s Kospi lost 2.2% and stocks in Shanghai dropped 1.2%.
Gold rose $4.40 to settle at $1,672.40 per ounce. Silver fell 13 cents to $17.26 an ounce, and copper slipped 1 cent to $2.56 a pound.
Wholesale gasoline fell 13 cents to $1.39 a gallon, heating oil fell 10 cents to $1.39 a gallon and natural gas lost 6 cents to $1.71 per 1,000 cubic feet.