U.S. Stocks Open Lower After Trump Issues Warning on Pandemic
April 01 2020 - 10:55AM
Dow Jones News
By Avantika Chilkoti and Frances Yoon
Stocks fell Wednesday after President Trump issued a stark new
warning on the spread of the novel coronavirus in the U.S.,
reviving concerns about the potential damage to the world's largest
economy.
The Dow Jones Industrial Average dropped 606 points, or 2.8%, in
morning trading, a day after the index closed out its worst-ever
first quarter. The S&P 500 fell 3.1%, while the Nasdaq
Composite was down 2.6%.
European stocks also fell, with the pan-continental Stoxx Europe
600 index retreating 3.1%.
Mr. Trump warned that the U.S. could face as many as 240,000
deaths as he asked Americans to brace for an unprecedented crisis
in the days ahead. The nation has more confirmed cases than any
other country, with more than 189,000 infections, and projections
from the University of Washington show the illness could result in
2,214 deaths a day at the peak in two weeks.
"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."
As investors turned to assets that are perceived to be the
safest, the yield on the 10-year U.S. Treasury note fell to 0.591%,
from 0.691% Tuesday. Yields drop as bond prices climb.
The WSJ Dollar Index, which tracks the greenback against a
basket of currencies, gained 0.5% after the Federal Reserve took
fresh steps to alleviate stresses in currency markets. On Tuesday,
the U.S. Federal Reserve said it would launch a temporary lending
facility that would allow foreign central banks to convert their
holdings of Treasury securities into dollars.
In corporate news, Marriott International shares dropped 7.1%, a
day after the hotel chain said it is investigating a data breach
that exposed up to 5.2 million customers' personal information.
Futures on Brent crude, the global oil benchmark, dropped 4.5%
to $25.17 a barrel after an agreement between major oil-producing
nations limiting the output lapsed overnight. Saudi Arabia is
preparing to flood oil markets as early as Wednesday as the kingdom
forges ahead with a price war with Russia. Oil prices have tumbled
more than 60% so far this year.
In currencies, the euro slid 0.9% against the U.S. dollar. A
series of business surveys released Wednesday showed that 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 to
be frozen.
In Asia, Japan's Nikkei 225 lost 4.5% and Hong Kong's Hang Seng
closed 2.2% lower. Meanwhile, Australia's ASX 200 gained 3.6%.
Fresh data showed the U.S. factory sector contracted in March as
the coronavirus disrupted supply chains and shut down businesses,
although 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 already passed three major pieces of
legislation to keep the virus outbreak from throwing the economy
into the deepest downturn since the Great Depression, while the Fed
has slashed its benchmark interest rate to near zero.
"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 Avantika Chilkoti at Avantika.Chilkoti@wsj.com and
Frances Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
April 01, 2020 10:40 ET (14:40 GMT)
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