The S&P 500 fell for the seventh straight day on Friday and the benchmark index suffered its biggest weekly drop since the 2008 global financial crisis on growing fears the fast-spreading coronavirus could push the economy into recession.
However, stocks regained some ground right at the end of a volatile session.
The Dow and the Nasdaq also registered their deepest weekly percentage losses since October 2008.
The Dow Jones Industrial Average swung back from an early slide of more than 1,000 points to close around 350 points lower. The S&P 500 fell 0.8% and is now down 13% since hitting a record high just 10 days ago. The Nasdaq reversed an early decline to finish flat.
The Dow lost nearly 3,600 points this week and the S&P 500 posted a double-digit weekly percentage loss for only the fifth time since 1940.
The market clawed back much of its intraday losses in the last 15 minutes of trading as some buyers emerged, keeping the indexes from another steep plunge.
The market’s losses moderated somewhat after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in mid-March.
Global financial markets have been rattled by the virus outbreak that has been shutting down industrial centers, emptying shops and severely crimping travel all over the world. More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.
The rout has knocked every major index into what market watchers call a “correction,” or a fall of 10% or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.
Bond prices soared again as investors sought safety and became more pessimistic about the economy’s prospects. That pushed yields to more record lows. The yield on the 10-year Treasury note fell sharply, to 1.14% from 1.30% late Thursday. That’s a record low, according to TradeWeb. That yield is a benchmark for home mortgages and many other kinds of loans.
Crude oil prices sank 4.9% over worries that global travel and shipping will be severely crimped and hurt demand for energy. The price of benchmark U.S. crude has now fallen 15% this week.
“All this says to us is that there are still a lot of worries in the market,” said Gene Goldman, chief investment officer at Cetera Financial Group. “We need the Fed to come out and say basically guys, we got your back.”
Traders have been growing more certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon. Goldman said the Fed’s current lack of action amounts to a tightening of rates compared with other nations and their actions to offset the impact of the coronavirus.
Investors now widely expect the Fed to cut interest rates by a half-point at its meeting that winds up March 18. According to data from the Chicago Mercantile Exchange’s Fedwatch tool, the expectations for a half-point cut jumped from 47% just before the Fed’s statement was released to 60% by the close of trading.
The damage from a week of almost relentless selling was eye-popping: The Dow Jones Industrial Average fell 3,583 points, or 12.4%. Microsoft and Apple, the two most valuable companies in the S&P 500, lost a combined $300 billion. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16%.
The latest losses have wiped out the S&P 500′s gains going back to October. The benchmark index is still up 6.1% over the past 12 months, not including dividends.
The sell-off follows months of uncertainty about the spread of the virus, which hit China in December and shut down large swaths of that nation by January. China is still the hardest hit country and has most of the 83,000 cases worldwide and related deaths.
Uncertainty turned into fear as the virus started jumping to places outside of the epicenter and dashed hopes for containment.
“Fear is a stronger emotion than hope,” said Ann Miletti, head of active equity at Wells Fargo Asset Management. “This is what we’re seeing today and this week and over the past seven days.
Airlines have suffered some of the worst hits as flight routes are cancelled, along with travel plans. Big names like Apple and Budweiser brewer AB InBev are part of a growing list of companies expecting financial pain from the virus. Dell and athletic-wear company Columbia Sportswear are the latest companies expecting an impact to their bottom lines.
Cruise operators have also been hard hit, with shares sinking 30% or more as shipboard infections rose. But those companies were having a far better day Friday, with some on Wall Street believing that the sell-off was overdone. Shares of Royal Caribbean Cruises rose 4.4%, while Norwegian Cruise Line Holdings gained 7.3%. Carnival’s shares climbed 5.1%.
A big concern investors have is that the stock market rout could have a psychological effect on consumers, making them reluctant to spend money and go to crowded places like stores, restaurants and movie theaters.
The late-2018 stock market plunge, for instance, derailed holiday sales that year. Now, analysts are worried that the latest stock swoon could cause consumer spending — which makes up some 70% of the economy and has played a huge role in keeping the U.S. expansion going — to contract again.
Craig Johnson, president of Customer Growth Partners, a consumer consultancy, says he had expected annual retail sales to be up 4.1%, but he now says it could increase just 2.2% if the impact of the new virus in China persists beyond April.
‘’This is a moving target right now,”’ he said. ’’There is a lot of uncertainty.”
Many companies face the prospect of crimped financial results with their stocks already trading at high levels relative to their earnings. Before the virus worries exploded, investors had been pushing stocks higher on expectations that strong profit growth was set to resume for companies after declining for most of 2019.
Nearly 60 nations representing every continent, except Antarctica, have confirmed cases. The virus outbreak has prompted a wide range of reactions from nations hoping to contain its spread and economic impact.
The Geneva auto show was cancelled as Swiss authorities banned large events of more than 1,000 people. Parts of Italy’s northern industrial and financial center remain under quarantine.
MARKET DATA ROUNDUP
- The Dow fell 357.28 points, or 1.4%, to 25,409.36, after plunging as much as 4.2%, or more than 1,000 points, earlier in the day.
- The S&P 500 slid 24.54 points, or 0.8%, to 2,954.22.
- The Nasdaq rose 0.89 points, or less than 0.1%, to 8,567.37, after plunging as much as 3.5% during the session.
- The Russell 2000 index of smaller company stocks lost 21.40 points, or 1.4%, to 1,476.47.
- After the bell, S&P 500 e-mini futures were up about 1% and the Invesco QQQ Trust ETF was up 1.3% in extended trade.
- On Thursday, all three indexes had confirmed corrections by finishing more than 10% below their closing record highs.
The CBOE volatility index, also known as Wall Street's fear gauge ended the day near its session low, up 0.95 point at 40.11, after rising as high as 49.48.
Of the S&P's 11 major sectors, the rate-sensitive financial index weighed the most on the benchmark S&P 500 index, ending the day down 2.6%. The utilities sector was the S&P's biggest percentage loser with a 3.3% drop. Real estate and consumer staples - also rate-sensitive sectors that are often seen as safe havens - both fell more than 2%.
Yet the energy, technology and communications services index all showed gains for the day.
Declining issues outnumbered advancing ones on the NYSE by a 3.39-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 129 new lows; the Nasdaq Composite recorded 19 new highs and 538 new lows.
Trading was brisk on U.S. exchanges with 19.31 billion shares changing hands compared with a 9.25 billion-share average for the last 20 days.
In commodities trading, benchmark crude oil fell $2.33 to settle at $44.76 a barrel. Brent crude oil, the international standard, dropped $1.66 to close at $50.52 a barrel. Wholesale gasoline fell 2 cents to $1.39 per gallon. Heating oil was unchanged at $1.49 per gallon. Natural gas fell 7 cents to $1.68 per 1,000 cubic feet.
Gold fell $75.90 to $1,564.10 per ounce, silver fell $1.27 cents to $16.39 per ounce and copper fell 2 cents to $2.55 per pound.
The dollar fell to 108.42 Japanese yen from 109.95 yen on Thursday. The euro weakened to $1.0967 from $1.0987.
Coronavirus panic sent world stock markets tumbling again on Friday, with an index of global stocks setting its largest weekly fall since the 2008 global financial crisis, and over $5 trillion wiped from global market value this week.
MSCI's gauge of stocks across the globe shed 1.76% for a weekly loss over 10%, its second largest on record.
The over $5 trillion lost in market capitalization globally this week is roughly equivalent to Japan's yearly GDP, the third-largest in the world.
Japan's Nikkei futures lost 0.28%. China’s benchmark index fell 3.7% and Germany’s DAX fell 3.9%.
This report uses material from the AP and Reuters.
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