The Dow Jones Industrial Average fell more than 650 points, or 2.5%, erasing much of the gains notched Wednesday. A strong Super Tuesday performance by former Vice President Joe Biden and growing signs of a coordinated response to the coronavirus had led to a sharp rally in U.S. stocks.
That enthusiasm quickly dissipated Thursday. The S&P 500 fell 2.3%. The Nasdaq Composite shed 1.8%. Losses in the stock market were broad, with all 11 of the S&P 500’s sectors falling in early trading Thursday.
It has been a dizzying week on Wall Street. Sharp stock swings up and down have dominated the week, continuing a bout of volatility that led to the worst selloff since the financial crisis last week.
“I know that these wild swings are overwhelming for all of us,” said Amy Kong, chief investment officer at Barrett Asset Management. “The situation is still unfolding.”
Still, some investors said they expected the stock market gyrations to continue, with much remaining unknown about how far the coronavirus will spread and its ramifications on economic growth around the globe.
In recent days, the outlook for corporate earnings and economic growth this year has darkened, weighing on the stock market. Many have been worried that the virus will harm consumer sentiment and business investment around the world.
Investors will analyze fresh economic data this week for signs of wilting growth. Data on Thursday showed that U.S. factory orders fell in January. New orders for manufactured goods decreased 0.5%, the Commerce department said, more than what economists surveyed by The Wall Street Journal had expected.
On Friday, investors will be parsing the monthly jobs report to see if U.S. hiring remained strong in February. The number of Americans applying for first-time unemployment benefits fell last week, the Labor Department said Thursday, suggesting anxiety about the spread of the coronavirus haven’t yet affected layoffs.
The early stock decline Thursday suggests that steps by the Federal Reserve and U.S. lawmakers this week to bolster economic growth are failing to assuage investors.
Health authorities are warning that it may be impossible to fully contain the pathogen as infections are spreading within many communities. Meanwhile, steps taken to halt the outbreak have curtailed travel and business activity in the epicenters of the disease.
“There is a sense that there is only so much monetary policy can do, given markets have priced that in already,” said Jonas Goltermann, senior markets economist at Capital Economics. “Even with all the stimulus measures, those are not going to stop the virus and until there are signs the rate of infection is slowing we don’t think there will be a sustained rally.”
Investors are betting on more interest-rate cuts later this year, CME Group data show.
As stocks fell, investors sought the relative safety of government bonds, pushing the yield on the benchmark 10-year U.S. Treasury note down to 0.930%, from 0.994% at the close on Wednesday. Yields fall as bond prices rise.
The falling yields reflect high anxiety in markets as investors seek traditionally safer investments. They also have wide-ranging effects on borrowing costs and bank profitability. Shares of financial companies were some of the hardest hit in the stock market Thursday. Falling yields can crimp profits for big banks.
Meanwhile, mortgage rates fell to their lowest level on record Thursday as yields fell.
European stocks also fell, with the pan-continental Stoxx Europe 600 index down 1.6%. The basic resources sector and aerospace and defense companies were among the hardest hit.
U.S. stocks are poised to remain turbulent with the Cboe Volatility Index, or VIX, climbing to over 35. The index, sometimes known as Wall Street’s fear gauge, last week topped 40 to hit its highest level since 2011.
With volatility elevated and gauges of investor confidence low, markets are likely to keep swinging, according to Olivier d’Assier, head of applied research for the Asia-Pacific region at financial analytics firm Qontigo.
“We are going to be stuck in this for a while” Mr. d’Assier said. “You’ve got short-term traders buying on the stimulus and then you have medium- and long-term investors de-risking.”
Investor sentiment had shown signs of improvement Wednesday after U.S. lawmakers passed an $8 billion-emergency spending package on Wednesday to combat the coronavirus. Meanwhile, the International Monetary Fund detailed the $50 billion in lending programs it has that could help countries grappling with the virus.
Travel and leisure stocks continued to take a beating. Cruise line operator Norwegian Cruise Line Holdings fell about 9.8%, while Royal Caribbean Cruises dropped 12% as travelers continue to back out of planned cruises because of virus fears. American Airlines retreated 8.4%.
In contrast, most Asian markets rose Thursday, with the Shanghai Composite Index and Hong Kong’s Hang Seng Index both closing up around 2%.
Eli Lee, head of investment strategy at Bank of Singapore, said he viewed recent market action as noise. “The rebound is the latest in a series of gyrations we’ve seen, and reflects the fact equities were likely oversold,” he said.
Mr. Lee said a coordinated international monetary and fiscal response would help boost financial conditions and investor sentiment, but added: “These are ultimately very blunt tools against a medical crisis that is poised to cause a sharp shock to consumer demand and production.”
In commodities, Brent crude, the global oil benchmark, wavered between gains and losses before edging down 0.6% in recent trading. OPEC has reached a preliminary agreement to cut crude output amid a global glut and eroding demand, The Wall Street Journal reported, as members of the oil-exporting group and their allies gather for a two-day meeting in Vienna. The collective plan, in response to the virus outbreak, still needs to be approved by Russia.
“In order for this to succeed, they need Russia to be onboard or they would just pass over market share to a major competitor,” said Ole Hansen, head of commodity strategy at Saxo Bank.