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Wall Street's Major Stock Indexes Plunge 4% as Coronavirus Anxiety Grows

Wall Street's Major Stock Indexes Plunge 4% as Coronavirus Anxiety Grows
(Dreamstime.com)
 

Wednesday, 01 April 2020 04:01 PM

The U.S. benchmark S&P 500 stock index fell more than 4% on Wednesday after a dire warning on the U.S. death toll from the coronavirus sent investors running from even the most defensive equities.

Economic data showed U.S. manufacturing activity contracted less than expected in March, but disruptions caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low, reinforcing economists' views that the economy was in recession.

Also, business closures as authorities tried to contain the coronavirus pushed private payrolls down by 27,000 jobs last month, the first decline since September 2017, the ADP National Employment Report showed separately on Wednesday. {nL1N2BP0LV]

The blue-chip Dow Jones Industrial Average and benchmark S&P 500 indexes extended losses after suffering their worst first quarter as President Donald Trump warned Americans of a "painful" two weeks ahead and health officials highlighted research predictions of an enormous jump in virus-related deaths.

Roughly two weeks before the first-quarter earnings season is due to start in earnest, investors are "very sensitive to the latest headlines" about the virus due to a lack of fundamental information," said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio.

"We don't know all the economic and earnings impact yet and this is a sober thought for Americans with those projections of the death rate," said Augustine.

S&P 500 firms are expected to enter an earnings recession in 2020, falling 4.3% in the first quarter and 10.9% in the second, according to the latest estimates gathered by Refinitiv.

The Dow Jones Industrial Average fell 973.65 points, or 4.44%, to 20,943.51, the S&P 500 lost 114.09 points, or 4.41%, to 2,470.5 and the Nasdaq Composite dropped 339.52 points, or 4.41%, to 7,360.58. 

"President Trump's warning about two dreadful weeks ahead and 100,000 - 240,000 deaths in the coming months is definitely putting a negative tone on the market," said Societe Generale strategist Kit Juckes. "It is pretty risk-off out there. It is definitely a day of lower bonds yields, falling equity indexes and tin hats."

U.S. markets ended the first quarter on Tuesday, marked by the largest quarterly fall since 1987 for the Dow Jones and the steepest for the benchmark S&P 500 since the financial crisis. The fact it all happened in a month and from record highs made it feel all the more brutal.

U.S. economic activity is likely to be "very bad" and the unemployment rate could rise above 10% because of efforts to slow the spread of the coronavirus, Cleveland Federal Reserve Bank President Loretta Mester told CNBC.

GLOBAL MARKETS

World equity markets began the new quarter with steep losses as evidence mounted that the coronavirus pandemic was sending the global economy into a deep recession.

Traders headed for the safety of government bonds, the dollar and gold following sharp slowdowns in manufacturing activity in Japan and Germany, one day after data showed U.S. consumer confidence fell to three-year lows. New orders for U.S.-made goods fell to an 11-year low and private payrolls fell for the first time since 2017.

MSCI's gauge of stocks across the globe sank 3.09% following a 4.5% drop in Tokyo's Nikkei and broad declines in Europe. The index is now down about 25% for the year to date.

In currency markets, the dollar's safe-haven appeal pushed it up 0.6% against a basket of major currencies.

"In my view, markets have still not fully priced in the damage from the coronavirus, with some people still talking about V-shaped recovery," said Masahiko Loo, portfolio manager at Alliance Bernstein in Tokyo.

"The U.S. and Europe are hit by the first wave now, but as you can see in Asia, there could be more waves from re-imported cases. Human psychology also does not quickly recover either after an experience like this."

Traders jumped toward the perceived safety of government bonds, pushing the yield on the benchmark 10-year U.S. Treasury note to 0.6238% from 0.699% late on Tuesday.

Commodity markets were rougher. Brent crude fell more than 6% to $24.74 per barrel as the United States, Russia, and Saudi Arabia jostled over a massive oversupply of oil. West Texas Intermediate (WTI) crude fell 17 cents to settle at $20.31 a barrel, after hitting a low at $19.90.

Crude oil benchmarks ended the first quarter with their biggest losses in history. Both U.S. and Brent futures got hammered throughout March by the pandemic and a Saudi-Russia price war.

Global demand has been cut sharply by travel restrictions. Forecasters at major merchants and banks see demand slumping by 20% to 30% in April, and for weak consumption to linger for months.

© 2020 Thomson/Reuters. All rights reserved.


   
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The benchmark S&P 500 index fell more than 4% on Wednesday after a dire warning on the U.S. death toll from coronavirus sent investors running from even the most defensive equities.
wall street, stocks, dow, virus
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2020-01-01
Wednesday, 01 April 2020 04:01 PM
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