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U.S. stocks fell sharply again on Wednesday as investors grappled with a flood of plans by governments to limit the economic blow of the COVID-19 outbreak and debated whether the measures will be enough to limit the economic blow.
The S&P 500 index tumbled about 6.3%, while Treasuries looked to extend their biggest yield jump since 2008 on Tuesday as markets braced for a flood of government borrowing. Crude oil prices dropped to an 18-year low and the U.S. dollar rose for a seventh straight day.
How are stocks performing?
The Dow Jones Industrial Average DJIA, -6.17% fell 1,330 points, or 6.3%, to 19,924. The S&P 500 SPX, -5.51% dropped 143 points, or 5.6%, to 2,386. The Nasdaq Composite COMP, -4.50% slipped 346 points, or 4.7%, to 6,980.
The Dow on Tuesday rose 1,048.79 points, or 5.2%, to 21,237.31, after briefly dipping below the psychologically important 20,000 threshold midmorning, while the S&P 500 index added 143.06 points, or 6%, to close at 2,529.19. The Nasdaq Composite Index closed up 430.19 points or 6.2%, at 7,334.78.
What’s driving the market?
Stocks skid on worries the countries affected by the coronavirus are headed for a prolonged lockdown, potentially leading to defaults not just across major corporations but also small businesses that may struggle to survive a sharp drop in revenues over the next few months.
“The overriding fundamental questions of when will the virus end, and how will small businesses and their employees survive, remain unanswered. As resolution gets closer, markets will ultimately find a bottom,” wrote James Meyer, chief investment officer at Tower Bridge Advisors.
Treasury Secretary Steven Mnuchin said Wednesday morning that the government is work on some $1.3 trillion of emergency funding, as well as other measures, to businesses and workers “right away,” in a CNBC interview.
“We’re going to deliver assistance,” he said, adding that earlier estimates that the jobless rate could sour to 20% was not inevitable, particularly if the government acts quickly.
Stocks were buoyed on Tuesday as the Trump administration signaled support for a stimulus package, including direct payments to individuals and rescue packages for industries.
The S&P 500 has swung 4% or more in either direction for seven consecutive sessions through Tuesday’s close, topping the previous record of six days from November 1929, according to Dow Jones Market Data. The S&P 500 is 29.5% off its record high through Wednesday.
Investors also were weighing the jump in the 10-year Treasury yield to 1.13% Wednesday after trading around 0.77% midday Tuesday before details of the Trump administration’s potential stimulus emerged, signaling a massive borrowing surge by the federal government.
“When you decimate the restaurant industry, the travel industry, the hotel industry, the airline industry .. the cruise line industry, obviously you’re going to take a huge divot out of economic activity,” DoubleLine Capital CEO Jeffrey Gundlach said on a webcast Tuesday.
The Federal Reserve, after moving to cut its policy interest rate to nearly zero on Sunday and reviving some of its programs from the 2008 crisis, on Tuesday unveiled a commercial paper facility aimed at providing a liquidity backstop to the market.
The actions were seen as a response to pressures in the funding market amid rising demand for short-term cash from companies dealing with the slowdown caused by the outbreak.
“While market concerns are not fully addressed yet, the direction and scale of the monetary and fiscal policy response continue to move in the right direction. Uncertainty remains over whether current announced measures will prove sufficient or whether additional stimulus will be required,” said Mark Haefele, chief investment officer for UBS Global Wealth Management.
In economic data, the Commerce Department said construction on new homes ran at an annualized pace of 1.6 million in February, a 1.5% decrease.
Read: How the Fed’s latest crisis-era credit facility aims to finally calm rattled markets
Which companies are in focus?
Shares of Dow component Boeing Co.’s BA, -16.04% plunged Wednesday toward a seven-year low as expectations for a bailout of the aerospace giant failed to offset the potential liquidity issues and worries around how the coronavirus could diminish demand for air travel.
Shares of ConocoPhillips COP, -10.21% fell after the oil giant said it would cut capital spending for 2020 by 10%, and slow share buybacks.
Skechers USA Inc.’s SKX, -13.97% stock dropped after the shoe company said it would temporarily close stores in North America and certain European markets through March 28. The company withdrew its previously announced guidance.
Home Depot Inc. HD, -8.85% shares fell after it announced it would close at 6 p.m starting Thursday, though opening hours would stay the same.
Starbucks Corp. SBUX, -13.67% said it would authorize a repurchase of 40 million shares, with its store in China now 90% open.
How did other markets trade?
April futures for West Texas Intermediate crude CLJ20, -14.81%, the U.S. gauge of oil prices, plunged more than 14% to $22.90 a barrel on the New York Mercantile Exchange.
In currencies, the ICE U.S. dollar index DXY, +1.59%, which tracks the greenback’s performance against a basket of its major rivals, was up 1.4%. Investors say the rush for liquidity and dollar funding has helped the dollar erase its initial drop at the end of February.
Global equity markets were trading lower on Wednesday. The STOXX Europe 600 index SXXP, -3.91% was down 4%, while the U.K.’s FTSE 100 UKX, -3.76% was down 3.9%.
