Wall Street's main indexes plunged on Thursday for the sixth straight session, with the S&P 500 confirming its fastest correction in history as the rapid global spread of coronavirus intensified worries about economic growth.
The S&P 500 finished 12% below its Feb. 19 record close, marking its fastest correction ever in just six trading days. The previous record was nine days in early 2018, according to S&P Dow Jones Indices analyst Howard Silverblatt.
The Dow registered a record one-day points drop, which was also its fourth 1,000-point decline in history and the second this week.
The Dow Jones Industrial Average fell 1,190.95 points, or 4.42%, to 25,766.64, the S&P 500 lost 137.63 points, or 4.42%, to 2,978.76 and the Nasdaq Composite dropped 414.30 points, or 4.61%, to 8,566.48.
The Dow ended 12.8% below its Feb. 12 record close and Nasdaq closed 12.7% under its Feb. 19 closing peak.
All three major U.S. indexes were also on track for their steepest weekly pullback since the global financial crisis, as new infections reported around the world surpassed those in mainland China.
Governments battling the epidemic from Iran to Australia shut schools, canceled big events and stocked up on medical supplies. In the United States, the Centers for Disease Control and Prevention late Wednesday confirmed an infection of unknown origin in California.
While selling eased for a while during the session the S&P's losses deepened rapidly in the last hour of trading to end at a session low, registering its biggest one-day percentage loss since August 18 2011.
"The path of this scourge is unknown, therefore you can't know the economic impact. You can roll the dice but it's a guess," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.
But Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois, urged some caution. "People have gone from saying this is a non-event to saying this is the end of the world. There's room for a middle ground," said Jankovskis, who suggested opting for defensive bets.
"The virus will spread somewhat but it doesn't mean that it'll make the entire world grind to a halt," he said.
The CBOE volatility index, also known as the fear index, ended near its session high, up 11.60 points at 39.16, its highest level since February 2018.
All of the 11 S&P sectors closed lower with real estate , technology and energy sectors all losing more than 5%. The best performers were the healthcare and industrials sectors, which all closed down more than 3%.
The NYSE Arca Airline index ended down 5.7% on fears about travel disruptions around the world, while the Philadelphia SE Semiconductor index, which includes China-exposed stocks, fell 4.7%.
Industry analysts and economists continued to sound the alarm as they assessed the fallout of the outbreak, with Goldman Sachs saying U.S. firms will generate no earnings growth in 2020.
Microsoft Corp., the biggest drag on the S&P, dropped almost 7% after it warned of weakness in PC business due to a hit to its supply chain from the coronavirus, echoing similar statements from Apple Inc. and HP.
While it was the biggest boost for the S&P, 3M Co. pared gains sharply as the day wore on, ending up just 0.8% at $150.16 after rising as high as $155.43. An analyst had upgraded the stock, citing possible benefit from higher sales of respirator masks during the outbreak.
In the busiest trading session at least since July 2014, according to data from Refinitiv, 15.63 billion shares changed hands on U.S. exchanges on Thursday compared with the average 8.67 billion for the last 20 sessions.
Declining issues outnumbered advancing ones on the NYSE by a 7.51-to-1 ratio; on Nasdaq, a 5.87-to-1 ratio favored decliners.
The S&P 500 posted four new 52-week highs and 102 new lows; the Nasdaq Composite recorded 24 new highs and 489 new lows.
Risk aversion also drove global stocks lower, increasing their drop in value this week alone to more than $3 trillion, and U.S. Treasuries yields hit record lows as the coronavirus spread faster outside China than in.
The pan-European STOXX 600 index lost 3.75%, for a more than 10% drop from its record closing high set last week.
MSCI's gauge of stocks across the globe shed 2.47%.
Emerging market stocks lost 0.90%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.07% lower, while Japan's Nikkei lost 2.13% to a 4-1/2-month low.
With the infection rate in China appearing to be slowing, the blue-chip CSI300 index finished up 0.3%. China's central bank said on Thursday it would ensure ample liquidity to help limit the impact of the epidemic.
Treasury yields ticked higher after an initial drop sent the yield on the benchmark 10-year note to an all-time low for the third consecutive day.
U.S. 10-year notes last rose 6/32 in price to yield 1.2905%, from 1.31% late on Wednesday. The 30-year bond last rose 9/32 in price to yield 1.7865%, from 1.798%.
The dollar fell as investors bet that the Fed would cut interest rates to offset the impact of the spreading coronavirus. With U.S. rates relatively high, and the scope for them to fall much wider, investors are reversing out of the dollar.
"Rate cut expectations have gained momentum and U.S. rate expectations are falling a lot more than they are in the euro zone," said Thu Lan Nguyen, an analyst at Commerzbank.
The dollar index fell 0.603%, with the euro up 0.95% to $1.0985. Sterling was last trading at $1.2884, down 0.15% on the day.
The Japanese yen strengthened 0.43% versus the greenback at 109.95 per dollar.
Gold was little changed after hitting a fresh 7-year high earlier.
Oil prices plunged for a fifth day on fears of a pandemic that could slow the global economy and dent demand for crude.
U.S. crude fell 3.92% to $46.82 per barrel and Brent was last at $51.91, down 2.84% on the day.
NO DEEP BEAR MARKET?
Markets are pricing a roughly even chance the Federal Reserve will cut interest rates next month and have almost fully priced in a cut by April.
Yields on benchmark German 10-year debt fell to -0.5140%. Italian debt underperformed as the spread of the virus there raised fears of a recession.
Goldman Sachs said the equity market sell-off would create opportunities to add risk eventually and that it did not expect a deep bear market or U.S. recession.
"However, near term we feel that positioning and valuations are not yet depressed enough and uncertainty on the global growth impact from the coronavirus is likely to remain high," Goldman Sachs said in a note to clients.
Analysts have downgraded forecasts for Chinese and global growth, and policymakers from Asia, Europe and the United States have begun to prepare for a steeper economic downturn.
South Korean stocks shed another 1.05% on Thursday, closing at a four-month low, as it reported its largest daily rise in new virus cases since its first infection last month.
Unnerving investors further, the Bank of Korea kept interest rates unchanged on Thursday even though it downgraded its growth outlook.
With the infection rate in China slowing, the blue-chip CSI300 index finished up 0.3%. China's central bank said on Thursday it would ensure ample liquidity to help limit the impact of the epidemic.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%, taking it more than 4% lower for the week.
Taiwan raised its epidemic response level to the highest possible and Japan's Nikkei dropped 2% to a four-month low amid more worries the Tokyo Olympic Games would be canceled or shifted.
The safe-haven yen and the Swiss franc gained on Thursday with the Japanese currency heading towards 110 yen to the dollar, up nearly 2% so far this week. The dollar fell 0.32%.
That was enough to help drag the China-sensitive Aussie dollar up from an 11-year low and lend support to the euro.
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