Wall Street closed lower Tuesday and ended one of its worst quarters since the 2008 financial crisis as investors retreated after a brutal month of losses due to the coronavirus pandemic.
The S&P 500 fell 12.5% in March for its biggest quarterly decline since the last quarter of 2008. For the Dow, it was the worst three-month period since late 1987.
The Dow Jones Industrial Average closed down 410.32 or 1.84% to 21,917.16.
The NASDAQ composite index closed down 74.05 or .95% to 7.700.10.
The S&P 500 closed down 42.06 or 1.60% to 2,584.59.
The big question is if markets will get worse. At this point, no one knows.
“It’s a pretty quiet day,” said George Rusnak, managing director of investment strategy at Wells Fargo Private Bank. “People are trying to digest the length and magnitude of what the coronavirus impact is going to be.”
Tuesday’s drop comes as Goldman Sachs downgraded the outlook for the U.S. economy between April and June.
Goldman revised its forecast because it thinks the U.S. labor market collapse will see the unemployment rate rise to 15% by midyear, compared to its previous forecast of 9%. That translates to about 25 million people out of work.
On Monday, U.S. indexes closed up by more than 3%, and the Dow was up 690.70 or 3.19% to 22,327.48.
After dropping sharply for two weeks, the market rallied recently on moves by central banks and governments to boost their economies, but the mood among investors still appears closely linked to evidence of the spread of the coronavirus.
The reason for the huge declines in stock markets from Tokyo to Toronto is that economies around the world are grinding to near standstills as businesses close their doors and people hunker down at home in hopes of slowing the spread of the virus. A record number of Americans applied for jobless benefits two weeks ago as layoffs sweep the country. The expectation is that markets will remain incredibly volatile until the number of new infections stops accelerating and investors can get some idea of just how bad the upcoming economic downturn will be.
The hope is that massive aid coming from the Federal Reserve and Capitol Hill can help prop up the economy in the meantime.
Oil prices rose a day after dropping to their lowest level since 2002.
The market’s reaction to the pandemic was evident with the news Tuesday that Spain saw a record 849 daily deaths of people who had the disease.
Strong Chinese economic data briefly shored up world stocks on Tuesday, but a worrying increase in the number of Spanish deaths linked to COVID-19 saw market sentiment sink back again.
Stock markets in Europe quickly shed a chunk of their gains. Germany's DAX index was up only 0.6 at 9,874 having earlier traded nearly 3% higher. Britain's FTSE 100 was up 0.8% at 5,610 while the CAC-40 in France fell 0.1% at 4,375.
Before the Spanish death toll numbers, sentiment had been boosted by the strong Chinese data showing that the world’s second-largest economy was recovering after authorities relaxed anti-disease controls and allowed factories to reopen as the number of infections have fallen sharply.
The monthly official manufacturing purchasing managers’ index — a broad gauge of economic activity — rose to 52.0 points in March from 35.7 in February, while the equivalent index for the non-manufacturing sector spiked to 52.3 from 29.6. Anything above 50 indicates an expansion in activity, so the sharp rebound is welcome news in the markets even though it points to fairly tepid growth.
“Investors should be careful about drawing too many inferences from one figure, since one swallow does not a summer make,” said Chris Beauchamp, chief market analyst at IG in London.
Since the height of the selling in markets a couple of weeks back, the mood has appeared to improve as governments and central banks use everything they can to contain the economic damage of the pandemic. The S&P 500, for example, is coming off its best week in 11 years, though it remains 22.4% below its record set last month, and oil tumbled to an 18-year low.
“We’re also still not even close to peak coronavirus in the U.S. which has already reported more cases than any other country and will sadly likely see a huge spike in the number of deaths, meaning further lockdown measures will likely follow,” said Craig Erlam, senior market analyst at OANDA Europe. “Huge challenges still lie ahead.”
Tuesday’s trading in Asia showed how fragile the mood can be.
Japan’s benchmark Nikkei 225 rose in morning trading but reversed course to dip nearly 0.9%, finishing at 18,917.01. Australia's S&P/ASX 200 also fell back, losing 2.0% to 5,076.80, while South Korea's Kospi picked up 2.2% to 1,754.64. Hong Kong’s Hang Seng stood at 23,603.48, up 1.9% and the Shanghai Composite inched up 0.1% to 2,750.30.
Benchmark U.S. crude added $1.40 to $21.49 a barrel after touching its lowest price since 2002. Oil started the year above $60 and has plunged on expectations that a weakened economy will burn less fuel. The world is awash in oil, meanwhile, as producers continue to pull more of it out of the ground. Brent crude, the international standard, picked up 73 cents to $23.49 per barrel.
In currency markets, the euro slid 1% to $1.0939 while the dollar rose 0.8% to 108.62 yen.
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