The Dow Jones Industrial Average plummeted nearly 3,000 points on Monday as fears deepen that the coronavirus outbreak will throw global economy into recession. Even for a market beset by volatility in recent weeks, the losses were staggering.
The historic drop was the worst for the Dow since 1987.
Voices from Wall Street to the White House said the coronavirus is likely dragging the economy into a recession.
The losses accelerated in the last hour of trading as President Donald Trump advised Americans to avoid large gatherings, saying it could be July or August before the virus subsides.
He also said he sees a chance of recession and promised help to the struggling airline industry. The losses came as huge swaths of the economy come closer to a standstill due to the outbreak as businesses and travel shut down.
The Dow was down 2,997 points, or 12.9% to close at 20,188.52.
The day ended much as it began, with the Dow sinking 2,200 points at the opening bell despite the U.S. Federal Reserve Bank cutting interest rates to nearly zero over the weekend in an emergency response to the coronavirus pandemic.
The moves were aimed at propping up the economy and getting financial markets running smoothly again, but they may have also raised fears even further. Investors are also waiting for the White House and Congress to offer more aid to an economy that’s increasingly shutting down by the hour.
Monday’s jaw-dropping dive came as the latest economic moves by the government’s central bank failed to overcome the fears investors have about the impact of the virus on global business and travel.
The Nasdaq lost 970.28, or 12.3%, to 6,904.59.
The S&P 500 was down nearly 12 percent to 2,386.13.
The broad index has plummeted nearly 30% since setting a record less than a month ago, and it’s at its lowest point since the end of 2018.
For at least the third time in a week, a plunge on Wall Street temporarily halted early trading as steep losses crossed the 5 percent mark, triggering the proverbial circuit-breaker.
The S&P 500’s losses, which were around 7 percent at the opening bell, deepened after trading resumed, according to The Associated Press. The selling was just as aggressive in markets around the world. European stocks and crude oil were both down about 10%. The world’s brightest spot may have been Japan, where the central bank announced more stimulus for the economy, and stocks still lost 2.5%.
The spreading coronavirus is causing businesses around the world to shut their doors, which is draining away revenue. That has economists slashing their expectations for upcoming months, and JPMorgan Chase says the U.S. economy may shrink at a 2% annual rate this quarter and 3% in the April-through-June quarter. To many investors, that meets the definition of a recession, and the question is how long it will last.
Strategists at Goldman Sachs say the S&P 500 could drop as low as 2,000 in the middle of the year, which would be a 41% drop from its record set just a month ago, before rallying back to 3,200 at the end of the year.
American Airlines and United Airlines both announced steep cutbacks to flights over the weekend as customers cancel trips and the U.S. government restricts travel. Other travel companies have also seen steep drops in demand from customers. Restaurants, movie theaters and other businesses that depend on drawing crowds appear to be next.
The Federal Reserve has been trying to do what it can to help the economy, and over the weekend it slashed short-term interest rates back to their record low of nearly zero.
It also said it also will buy at least $500 billion of Treasury securities and $200 billion of mortgage-backed securities to help calm the Treasury market, which is a bedrock for the world’s financial system and influences stock and bond prices around the world. Trading in the market began to get snarled last week, with traders saying they saw disconcertingly large gaps in prices offered by buyers and sellers.
— Information provided by The Associated Press was used to supplement this report. This is a developing story. Please return to AJC.com for updates.
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