Investor fears batter stocks; Dow loses 969
Day after rally, Wall Street slumps over virus concern
NEW YORK — Fear dominated financial markets again Thursday, and stocks fell sharply on worries about the fast-spreading virus outbreak. It’s the latest shudder in Wall Street’s most volatile week in more than eight years.
Major U.S. indexes lost over 3%, and Treasury yields — a global financial mainstay — touched more record lows. The slide nearly wiped out the surge stocks had ridden just a day earlier, which came in part on hopes that moves by authorities around the world could cushion the economic fallout.
The S&P 500 fell 106.18, or 3.4%, to 3,023.94. It’s now 10.7% below the record high it set on Feb. 19. The Dow Jones Industrial Average slumped 969.58, or 3.6%, to 26,121.28, and the Nasdaq lost 279.49, or 3.1%, to 8,738.59.
The yield on the 10-year Treasury note sank to 0.91% from 0.99% late Wednesday. Tumbling yields have sent the average rate on a 30-year fixed mortgage to a record low of 3.29%.
These market swings are likely to continue, as long as the number of new infections continues to accelerate, many analysts and professional investors say. Thursday was the fourth straight day in which the S&P 500 moved at least 2%, the longest such stretch since the summer of 2011.
All 11 of the S&P 500’s sectors turned negative, with financials, industrials and
energy the worst-performing sectors. All 30 Dow blue chips were in the red. United Technologies, aerospace giant Boeing, JP Morgan Chase and Goldman Sachs were among the Dow’s biggest drags. Profits for financial firms decline in a low-interest rate environment.
Travel-related companies continued to fall sharply on worries that frightened customers won’t want to confine themselves in planes or boats with others. Royal Caribbean Cruises sank 16.3%, Carnival fell 14.1% and American Airlines Group lost 13.4%.
This week, the S&P 500 has gone from a jump of 4.6% Monday, to a loss of 2.8%, and back to a rise of 4.2%. In normal times, a move of even 1% would be notable.
The growing understanding that the spread of infections — and resulting damage to the economy — may not slow anytime soon is pulling sharply on markets. That pull has taken turns this week with the increasingly worldwide push that governments and central banks are trying to give markets through spending plans and interest-rate cuts.
“We are expecting more dramatic market swings up and down and would not be surprised if we test last Friday’s lows again,” said David Donabedian, chief investment officer of CIBC Private Wealth Management, which manages $62 billion. “Volatility will be with us for a considerable period, given the election cycle and covid-19. We expect that economic data over the next two to three months will get worse before it gets better.” Covid-19 is the disease caused by the virus.
The outbreak has disrupted global supply chains and threatens to stymie economic growth since the first cases emerged in Wuhan, China, in late December, roiling markets across the globe.
In China, where the number of new infections has been slowing considerably, stocks trading in Shanghai have rallied nearly 12% since hitting bottom on Feb. 3. Factories there are gradually reopening, and a return to a sense of normal life may even be on the horizon after swift and severe actions by the government to corral the new form of coronavirus.
But elsewhere in the world, the mood is darker. There are about 17 times as many new infections outside China as in it, according to the World Health Organization.
Asian stock markets started Thursday off higher, riding the wave of optimism and hope that sent the S&P 500 soaring on Wednesday. U.S. congressional leaders reached a deal on an $8.3 billion bill to battle the outbreak, which the Senate passed Thursday, and the Bank of Canada followed up on the Federal Reserve’s surprise cut to interest rates the day before with its own.
On Thursday, Japan’s Nikkei 225 rose 1.1%, South Korea’s Kospi gained 1.3% and stocks in Shanghai jumped 2%.
But markets turned lower as trading moved to Europe. The French CAC 40 fell 1.9%, Germany’s DAX lost 1.5% and the FTSE 100 in London dropped 1.6%.
Gold climbed $25.00 to $1,668.00 per ounce as investors piled into investments seen as safe.
Benchmark U.S. crude oil lost 88 cents to settle at $45.90 per barrel. Brent crude, the international standard, fell $1.14 to $49.99 per barrel.
Silver rose 15 cents to $17.39 per ounce, and copper fell a penny to $2.57 per pound. Natural gas lost 6 cents to $1.77 per 1,000 cubic feet, heating oil fell 4 cents to $1.49 per gallon and wholesale gasoline lost 3 cents to $1.52 per gallon.
The dollar fell to 106.76 Japanese yen from 107.33 yen on Wednesday. The euro strengthened to $1.1190 from $1.1139.
“The Western world is now following some of China’s playbook, closing schools and declaring a state of emergency for example, but there is a sense that this is too little, too late,” said Chris Beauchamp, chief market analyst at IG.
Economists at the Institute of International Finance slashed their outlook for the global economy Thursday, downgrading their 2020 forecast for growth in the United States to 1.3% and that in China to below 4%. The revisions could “conceivably” take global growth to 1%, the weakest since 2009 and down from 2.6% last year, said the chief economist, Robin Brooks.
“The concern is that almost nothing has been done to stop the spread of the virus in the U.S. and Europe,” said Ilya Feygin, managing director at the institutional brokerage firm WallachBeth.
Policymakers have responded by cutting interest rates to prop up economic growth. They are expected to do so again, but the sell-off reflects in part the fact that lower interest rates will not address the immediate impact of the virus if factories are closed, workers are furloughed and consumers stop spending.
A growing list of companies is warning investors that the virus is hitting sales and profits, and investors are left with a lot of uncertainty about just how much economic growth will be affected.
“We could probably drive a metaphorical truck between the upside and downside cases here,” said Jason Pride, chief investment officer for private wealth at Glenmede.
In China, where the number of new infections has been slowing considerably, stocks trading in Shanghai have rallied nearly 12% since hitting bottom on Feb. 3. Factories there are gradually reopening, and a return to a sense of normal life may even be on the horizon after swift and severe actions by the government to corral the new form of coronavirus.