Stocks plummet amid virus fears
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.
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 coming to an abrupt end in a way no one even imagined just a few months ago.
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 Del
wiche, investment strategist at Baird.
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.
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 & 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?”
President Donald Trump met in the afternoon with Treasury Secretary Steven Mnuchin, economic adviser Larry Kudlow and other aides about a range of economic actions he could take. He also invited Wall Street executives to the White House on Wednesday to discuss the economic fallout from the epidemic.
At a White House press briefing Monday night, Trump said his administration will ask Congress to pass payroll tax relief and other quick measures aimed at easing the impact of the coronavirus on workers. Dow, S&P 500 and Nasdaq futures were up more than 2.5% following the remarks.
Asked about the danger of a U.S. recession, Mnuchin said at the White House briefing that the U.S. economy is resilient.