By Alexander Osipovich, Avantika Chilkoti and Frances Yoon 

Stocks opened the second quarter with a bruising selloff on Wednesday after President Trump issued a stark warning on the coronavirus pandemic, raising fears about its impact on the U.S. economy.

The Dow Jones Industrial Average dropped 973.65 points, or 4.4%, to 20943.51, marking its worst-ever first day of a quarter.

The S&P 500 fell 114.09, or 4.4%, to close at 2470.50. The Nasdaq Composite slid 339.52, or 4.4%, to close at 7360.58. All three indexes have lost at least one-quarter of their value since closing at record highs in February.

The White House warned on Tuesday that the U.S. could face as many as 240,000 deaths, with Mr. Trump asking Americans to brace for an unprecedented crisis in the days ahead. The U.S. now has more confirmed cases than any other country, with more than 203,000 infections, according to data from Johns Hopkins University. On Wednesday, Florida and Pennsylvania joined the list of states that have issued statewide stay-at-home orders.

"We're slowly peering through the fog and trying to see how bad things will become, but essentially we are flying blind," said Peter Dixon, a senior economist at Commerzbank. "It's very clear this is going to be the biggest sudden stop in measured history: The economy is just going to hit the buffers."

Overseas markets also fell. The pan-continental Stoxx Europe 600 index retreated 2.9%. In Asia, Japan's Nikkei 225 lost 4.5% and Hong Kong's Hang Seng dropped 2.2%.

As investors turned to assets that are perceived to be the safest, the yield on the 10-year U.S. Treasury note fell to 0.630%, from 0.691% Tuesday. Yields drop as bond prices climb.

All 11 sectors of the S&P 500 were down on Wednesday, with real-estate companies, utilities and financials among the worst decliners. JPMorgan Chase fell $5.67 a share, or 6.3%, to $84.36. Banks have been squeezed by both the decline in business activity and the Federal Reserve slashing interest rates to near zero.

Philip Blancato, CEO of Ladenburg Thalmann Asset Management, said the market had entered a new phase after the initial shock of the pandemic triggered a precipitous drop in major stock indexes. Stocks are cheap enough now that investors are eyeing opportunities and hoping the market will bottom out once measures to battle the virus show signs of effectiveness, he said.

"Stocks are now inexpensive," Mr. Blancato said. "If they're cheap, that creates a floor in the market for companies with good fundamentals."

Still, Wednesday marked the second consecutive days of declines for major U.S. stock indexes, a reversal from last week when the S&P 500 rallied more than 10%. Fears that the pandemic could worsen are driving fund managers to hold cash instead of buying stocks, said Randy Frederick, vice president of trading and derivatives at Schwab Center for Financial Research.

"There's a higher demand right now for everyone to stay liquid and have a higher cash allocation," Mr. Frederick said. "There's a fair amount of pessimism still out there."

In corporate news, Marriott International shares dropped $5.66, or 7.6%, to $69.15 a day after the hotel chain said it is investigating a data breach that exposed up to 5.2 million customers' personal information.

HP shares tumbled $2.52, or 15%, to $14.84 after Xerox Holdings called off its hostile bid to take over the PC and desktop-printer maker, saying the pandemic had undermined its ability to carry out the deal. Xerox shares fell $1.34, or 7.1%, to $17.60.

Futures on Brent crude, the global oil benchmark, dropped $1.61 a barrel, or 6.1%, to $24.74 after an agreement between major oil-producing nations limiting the output lapsed overnight. Saudi Arabia is preparing to flood oil markets as the kingdom forges ahead in a price war with Russia. Oil prices have tumbled more than 60% so far this year.

The WSJ Dollar Index, which tracks the greenback against a basket of currencies, gained 0.5% after the Fed took fresh steps to alleviate stresses in currency markets. On Tuesday, the U.S. central bank said it would launch a temporary lending facility that would allow foreign central banks to convert their holdings of Treasury securities into dollars.

A series of business surveys released Wednesday showed factories across Asia and Europe cut output and jobs at the fastest pace since the global financial crisis. The figures painted an almost uniform picture of sharply declining production, falling new orders and contracting payrolls. The main exception was China, which saw a slight rebound in activity as its economy began to thaw out, having been the first frozen.

In the U.S., fresh data showed the factory sector contracted in March as the coronavirus disrupted supply chains and shut down businesses, though not as badly as economists had feared.

The Institute for Supply Management said its manufacturing index fell to 49.1 in March from 50.1 in February. Economists had expected a reading of 44.5. Any number above 50 indicates an expansion of activity across the manufacturing sector, while readings below 50 signal a contraction.

U.S. lawmakers have passed three major pieces of legislation to keep the virus outbreak from throwing the economy into the deepest downturn since the Great Depression.

"In the U.S., we're at the beginning of a downturn," said Steven Englander, global head of G-10 foreign-exchange research and North America macro strategy at Standard Chartered Bank. "We're likely to see more unemployment, and the early bottom could come in May, but that is very speculative. For that to happen, we need a lot of good luck and serious implementation of economic and health-care policy."

While stimulus packages are good for the economy and would help American employees get through the next two months, there might be a need for "trillions more," Mr. Englander said. On Tuesday, Mr. Trump called for a new infrastructure-focused spending bill worth $2 trillion.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com, Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Frances Yoon at frances.yoon@wsj.com

(END) Dow Jones Newswires

April 01, 2020 16:53 ET (20:53 GMT)

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