By Anna Isaac, Frances Yoon and Karen Langley
U.S. stocks dropped sharply Wednesday as investors anxious about
the economic fallout from the coronavirus pandemic endured another
day of tumultuous trading.
The Dow Jones Industrial Average tumbled 1,465 points, or 5.9%,
to 23553. That put it in a bear market -- a decline of at least 20%
from its recent high, set Feb. 12. The index needed to close below
23641.136 to end the current bull market, an extraordinary run of
stock gains that began in 2009.
The S&P 500 fell 4.6% to 2741 and the Nasdaq Composite lost
4.7%. The S&P needed to close below 2708.92 to enter a bear
market.
Wednesday's losses were broad, with 29 of the 30 stocks in the
Dow suffering losses and all 11 sectors of the S&P falling at
least 3%
The declines accelerated midday after the World Health
Organization declared the new coronavirus a pandemic and said it is
"deeply concerned" by the "spread and severity" of the virus and by
"alarming levels of inaction."
.
The session continued a volatile week that saw stocks plunge
Monday only to recover much of their losses Tuesday. A closely
watched measure of turbulence in U.S. stocks, the Cboe Volatility
Index, was near its highest level in a year.
"We continue to see the day-to-day flow of news really
exhibiting itself in extreme volatility," said Jim Baird, chief
investment officer at Plante Moran Financial Advisors. "It's a
whole host of things that are really coming together to put
investors in a pretty cautionary stance at this point."
The Dow industrials were dragged lower by Boeing, which was down
13% after reporting 46 canceled jet orders for February, including
11 737 MAX planes for Air Canada.
Cruise companies continued to be battered by coronavirus fears,
with Norwegian Cruise Line Holdings dropping 16%, Royal Caribbean
Cruises losing 13% and Carnival Corp. shedding 13%.
After an 11-year run, the bull market in S&P 500 stocks is
coming to an end, equity analysts at Goldman Sachs Group said in a
note Wednesday. Lower crude-oil prices and interest rates are
likely to erode earnings for energy and finance companies, and
business activity will probably be weaker than previously
anticipated in other sectors, they wrote.
"Both the real economy and the financial economy are exhibiting
acute signs of stress," Goldman Sachs said in the note.
The number of coronavirus cases in the U.S. topped 1,000, while
China reported an increase in infections imported from abroad,
highlighting the challenges authorities face in containing the
epidemic. New York set up the country's first "containment area"
around one of the largest clusters of cases in the nation.
Brent crude, the global benchmark for oil prices, dropped 2.5%
to $36.28 a barrel. Saudi Arabia unveiled plans Wednesday to
increase its production levels even further days after it
instigated a price war with Russia.
In his first remarks since Monday's deep markets decline,
billionaire investor Warren Buffett said the selloff wasn't as bad
as some other famous moments in history, such as in October 1987 or
during the financial crisis.
Notably, during the financial crisis, Mr. Buffett was able to
offer lifelines to blue-chip companies, including Goldman Sachs
Group Inc. and General Electric Co. Berkshire Hathaway Inc.
ultimately earned more than $10 billion on its financial-crisis era
investments.
"The combination, actually, of the coronavirus and what happened
with oil over the week. I mean, that is -- that's a big one-two
punch," said Mr. Buffett in an interview with Yahoo Finance.
European stocks drifted lower Wednesday, shedding much of the
gains posted in the morning after an unexpected rate cut by the
Bank of England. The easing of monetary policy in the U.K. came
with other measures to support the economy, including cheaper
borrowing for small businesses.
The BOE made its move just over a week after the Federal Reserve
cut its key interest rate. The European Central Bank is expected to
ease policy Thursday as authorities take steps to shield economic
growth from the impact of the epidemic as business activity and
travel is curtailed.
"The U.K. was the first example of truly coordinated action from
the central bank and the Treasury," said James Smith, developed
markets economist at ING Bank. Markets are now poised to see if
countries and central banks would follow the U.K. 's lead. "The Fed
will be under a lot of pressure with rates so low elsewhere," Mr.
Smith said.
The yield on 10-year U.S. Treasurys rose to 0.814%, from 0.743%
on Tuesday. Bond yields, which move inversely to prices, have
careened in recent days: the widely watched benchmark tumbled to a
record intraday trough near 0.4% on Monday as investors sold off
equities and raced for the shelter of government bonds.
In the Asia-Pacific region, major markets reflected investors'
continued concerns about global growth prospects. Japan's Nikkei
225 index declined 2.3% to close at its lowest level since December
2018. Australia's S&P/ASX 200 dropped 3.6% to enter a bear
market, typically defined as a decline of at least 20% from a
recent peak.
"It's too early to call this stabilization, and it's too early
to position for a rebound here," said Mayank Mishra, a global macro
strategist at Standard Chartered Bank in Singapore. "Financial
markets will continue to focus on the economic implications from
the virus, and right now the global outlook for growth is not
rosy."
Write to Anna Isaac at anna.isaac@wsj.com, Frances Yoon at
frances.yoon@wsj.com and Karen Langley at karen.langley@wsj.com
(END) Dow Jones Newswires
March 11, 2020 16:22 ET (20:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.