Sell-off sends stocks plummeting
Dow loses 2,013 points; S&P’s fall triggers pause in trading
Stocks took their worst single-day beating on Wall Street since the global financial crisis of 2008 as a collapse in oil prices Monday combined with mounting alarm over the coronavirus’s effect on the world economy.
The losses 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 end.
On Wall Street, the S&P 500 plunged 7.4% in the first few minutes after the opening bell before trading was halted by the market’s circuit breakers, first adopted after the crash of October 1987 to give investors a chance to catch their breath. The marketwide circuit breakers had been triggered only once before, in 1997.
After the 15-minute pause, the S&P 500 trimmed its losses, but it still closed the day down 7.6%, at 2,746.56. The Dow Jones Industrial Average fell 2,013.76 points, or 7.8%, to 23,851.02. The Nasdaq gave up 7.3%, closing at 7,950.68.
The S&P 500 is now down 18.9% from the record high it set on Feb. 19, and it has lost $5.3 trillion in value during that time. U.S. stocks are now close to entering a bear market, defined as a drop of 20% from a peak.
The interest rate, or yield, on U.S. Treasury bonds sank to record lows as investors looking for a safe place kept on sinking money into them, even as the return on their investment fell closer and closer to zero.
The yield on the 10-year Treasury — a benchmark for mortgages and other consumer debt — was 1.9% as recently as Dec. 24. On Monday, it dipped to 0.34% before finishing the day at 0.498%. Up until last week, it had never been below 1%.
The sell-offs partly 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.
President Donald Trump said Monday that his administration will ask Congress to approve payroll-tax relief as he looks to calm financial markets’ fears over the effect of the coronavirus epidemic.
Trump told reporters that the administration was seeking “very substantial relief.” Treasury Secretary Steven Mnuchin and Larry Kudlow, the director of the National Economic Council, were expected to make the request to Senate Republicans this afternoon.
Trump also invited Wall Street executives to the White House on Wednesday to discuss the economic fallout from the epidemic.
Congressional leaders said they are considering their own legislative remedies. Democrats are discussing how to propose paid sick leave as part of new legislation, and a key Senate Republican, Finance Committee Chairman Charles Grassley of Iowa, is looking at changes to tax policy that could address the heightened fears.
Monday’s market slide came as Italy, the hardest-hit country 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.
Italy’s stock index plunged 11.2%. Britain, France and Germany were down between 7.7% and 8.4%.
The markets were 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.
In the U.S., the 10 worst-performing stocks in the S&P 500 were oil producers. All of them were down more than 30%, with shares of companies such as Marathon Oil and Apache Corp. down about 40%.
Larger oil producers such as Exxon Mobil and Chevron fell about 10%.
“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?”
“We knew it was going to be a hot day,” said John Spensieri, head of U.S. equity trading at Stifel. He said that the mood was “organized chaos” in the morning but that the trading halt achieved what it was supposed to by stopping the slide.
Despite the scary-looking red numbers flashing on CNBC and other news channels, some financial consultants advised ordinary investors to stick to their long-term plans and not panic.
Scott Heydt, a financial consultant at Heydt Air, said he expects the market will go back to normal, even though it could take a year or so. “It’s definitely not a comfortable time,” he said. “But people need to stop looking at their portfolios on their smartphones every two seconds if they don’t have a stomach for it.”
For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. The vast majority of people recover from the virus, as has already happened with most of those infected in China.
After initially taking an optimistic view on the virus, hoping that it would remain mostly in China and cause just a shortterm disruption, investors are realizing they probably underestimated the outbreak.
Traders are increasingly betting the Federal Reserve will cut interest rates back to zero to help the virus-weakened economy. But doubts are rising about how effective lower rates can be this time.
Information for this article was contributed by Stan Choe, Alex Veiga, Damian J. Troise, Zeke Miller, Paul Wiseman and Martin Crutsinger of The Associated Press; by staff members of The New York Times; and by Heather Long, Thomas Heath, Will Englund and Taylor Telford of The Washington Post.