Stocks plummet amid coronavirus fears and oil-price crash
A beat-down:
Stocks took their worst one-day beating on Wall Street since the global financial crisis of 2008 as a collapse in oil prices Monday combined with mounting alarm over what the coronavirus could do to the world economy. At an afternoon briefing, President Donald Trump said the administration was considering financial solutions to the crisis.
The staggering losses, including a 7.8% tumble in the Dow Jones Industrial Average, immediately raised fears that a recession might be on the way in the U.S. and that the record-breaking 11-year bull market on Wall Street may be com
ing to an abrupt end in a way no one even imagined just a few months ago.
Apple, Facebook and Tesla were among Bay Area companies caught up in one of the biggest stockmarket declines in recent memory as more fears about the spread of coronavirus, and its impact on the global economy, rattled markets.
The drop was so sharp that it triggered the first automatic halt in trading in more than two decades. European stock indexes likewise registered their heaviest losses since the darkest days of the 2008 meltdown and are now in a bear market.
Together, the sell-offs reflected growing anxiety over the potential global economic damage from the coronavirus, which has infected more than 110,000 people worldwide and killed about 4,000 while prompting factory shutdowns, travel bans, closings of schools and stores, and cancellations of conventions and celebrations big and small.
“The market has had a crisis of confidence,” said Willie Delwiche, investment strategist at Baird.
Trump on Monday proposed a payroll tax cut and other financial relief for hourly workers to help offset economic damage from the coronavirus, saying his administration would discuss those efforts with lawmakers on Tuesday.
Trump said his administration would propose “very dramatic” ideas, mentioning several, including loans for small businesses and financial help for the cruise, airline and hotel industries.
“This was something that we were thrown into, and we’re going to handle it,” the president said at the White House.
Trump, who has played down the economic effect from a virus that has sickened thousands, tried to reassure investors that the U.S. economy was resilient.
“We have a very strong economy,” he said. “This blindsided the world.”
Vice President Mike Pence said Monday that the relief measures the White House was proposing would ensure that Americans do not have to worry about losing their jobs or missing paychecks because of the coronavirus.
Trump’s comments came after he met with his economic advisers on Monday afternoon.
Treasury Secretary Steven Mnuchin and Larry Kudlow, the director of the National Economic Council, are expected to present the stimulus proposals to Republican lawmakers today.
Asked about the danger of a U.S. recession, Mnuchin said at the White House briefing that the U.S. economy is resilient.
“This is not like the financial crisis where we don’t know the end is in sight,” Mnuchin said. “This is about providing proper tools and liquidity to get through the next few months.”
The market slide came as Italy, the hardest-hit place in Europe, began enforcing a lockdown against 16 million people in the north, or one-quarter of the country’s population, and then announced that travel restrictions would be extended nationwide.
Premier Giuseppe Conte said all people will have to demonstrate a valid reason to travel beyond where they live.
Among Bay Area companies, Apple shares fell almost 8%, to close at $266.17; Salesforce also fell by almost 8%, to finish at $151.21 a share; Intel gave up 8%, to fall to $51.29; Facebook shares fell by 5.5%, to $171.05; HP slumped by 11.3%, to $19 a share; and Tesla ended the day down by 13.6%, at $608 a share.
“Investor perceptions surrounding the impact of the coronavirus have shifted from a supply chain disruption to a global demand shock,” said Joshua Golub, an analyst with Credit Suisse.
An example of the impact coronavirus is having on global businesses could be seen with Apple.
The company’s production partners in China shut down for several days in February in an effort to contain the spread of coronavirus in the country, and have been slow to get the product lines back up to full force. On Monday, the Chinese Academy of Information and Communications Technology said China shipped 500,000 iPhones last month, a figure that was less than half of the number of iPhones shipped in the same month a year ago.
The turmoil in Italy — marked by masked police officers and soldiers checking travelers’ documents and restrictions that affected such daily activities as enjoying an espresso at a cafe counter or running to the grocery store — is expected to push the country into recession and weigh on the European economy.
Elsewhere around the world, Ireland went so far as to cancel St. Patrick’s Day parades, and Israel ordered all visitors quarantined just weeks before Passover and Easter, one of the busiest travel periods of the year.
In the U.S., a cruise ship with a cluster of coronavirus cases that forced it to idle off the California coast for days docked at Oakland as officials prepared to start bringing passengers to military bases for quarantine or return them to their home countries. The Grand Princess had more than 3,500 people aboard, 21 of them infected.
The market was also dragged down by another, intertwined development: Oil prices plunged nearly 25% after Russia refused to roll back production in response to virus-depressed demand and Saudi Arabia signaled it will ramp up its own output.
While low oil prices can translate into cheaper gasoline, they wreak havoc on energy companies and countries that count on petroleum revenue, including the No. 1 producer, the United States.
“People are very anxious and very uncertain. Then all of a sudden you throw in a wild card that we weren’t expecting and people just went, ‘Ah!’ ” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.
He added: “A recession and a bear market are both a very realistic possibility right now.”
“The fear today is: Are the bears correct in talking about a recession around the corner from this?” said Quincy Krosby, chief market strategist at Prudential Financial. “Is this just about now? Is this just about the oil? Is this just about the virus? Or are we looking at a recession around the corner because all of this?”
On Wall Street, the drop in the S&P 500 triggered an automatic 15-minute market-wide trading halt by falling 7.4% in the first few minutes after the opening bell. The so-called circuit breaker has been triggered only once before, in 1997.
The S&P closed with a loss of 7.6%, its biggest oneday drop since Dec. 1, 2008. The Dow was down 2,013 points, or 7.8%, to 23,851.
The Nasdaq gave up 7.3%.
The S&P 500 has fallen 18.9% from the record high it set on Feb. 19 and has lost $5.3 trillion in value during that time. U.S. stocks are now uncomfortably close to entering a bear market, defined as a drop of 20% from their peak.
Italy’s stock index plunged 11.2%. Britain, France and Germany were down between 7.7% and 8.4%
The interest rate, or yield, on U.S. Treasury bonds fell to all-time lows as investors looking for a safe place kept on putting money into them, even as the return on investment sank closer and closer to zero. The yield on the 10-year Treasury note plunged to 0.59%. Up until last week, it had never been below 1%.
The carnage in the energy sector was particularly bad. With benchmark U.S. crude dropping to under $32 a barrel, the stock of Apache Corp. and Occidental Petroleum lost more than half its value. Exxon Mobil had its worst day since 2008, while Chevron had its second-biggest drop ever.