The decline underscores the level of worry among investors since the coronavirus pandemic escalated and disrupted supply chains, sidelined workers and infected tens of thousands of people. To combat the potential economic fallout, central banks and governments have put in place various stimulus measures.
Those efforts, so far, have yet to stem the selloff. The S&P 500 is down 30% from its peak reached less than a month ago. Shares in the two largest U.S. companies by market value—Apple Inc. and Microsoft Corp.—each dropped more than 12% Monday.
“This is what panic looks like,” said Patrick Healey, president and founder of Caliber Financial Partners. “It doesn’t matter what the Fed did over the weekend or what they could have done, the trading activity in the market is reflective of fear and uncertainty.”
“The only thing that is going to calm markets is seeing the number of [coronavirus] cases go down,” he said.
The blue-chip index plummeted 2997.10 points, or 13%, to 20188.52, marking the second worst day in the index’s history. The S&P 500 dropped 324.89 points, or 12%, to 2386.13. And the Nasdaq Composite tumbled 970.28 points, or 12%, to end the day at 6904.59—the tech-heavy index’s steepest ever one-day fall.
All three major indexes are in a bear market.
Bank stocks were among the hardest hit Monday, with Citigroup Inc. falling 19%. Bank of America Corp. and JPMorgan Chase & Co. both declined 15%. The Fed, which took a range of actions to support bank lending, noted companies around the world are drawing down their credit lines for working capital as economic activity slows, putting pressure on lenders.
Those efforts were part of the central bank’s broader bid to stabilize the economy. It slashed its benchmark interest rate to near zero—the second emergency rate cut this month and said it would buy $700 billion in Treasurys and mortgage-backed securities, among other things.
The news sent stock futures and global stocks sliding, with some investors viewing the move as too much stimulus, too soon.
“It’s basically using up all their ammunition within a three-week span,” said Terence Wong, chief executive of Azure Capital, a Singapore-based fund management firm. “There’s nothing left. They can’t use monetary loosening as part of their arsenal anymore.”
U.S. stock trading was halted for 15 minutes shortly after Monday’s opening bell when the S&P 500 tumbled more than 7%, triggering a marketwide circuit breaker. The automatic curb on trading marked the third time in six sessions that U.S. stocks have been halted intraday.
The declines accelerated in the final hour of trading after President Trump said the virus may not be under control until July or August.
The losses were broad: Only nine stocks in the S&P 500 ended the session in the green.
Yet there were surprising bright spots, too. American Airlines Group Inc. surged 11% on talks between U.S. airlines and the government to obtain as much as $50 billion in financial assistance. Moderna Inc. skyrocketed 24% after the biotechnology company said it had tested its coronavirus vaccine on one participant involved in its clinical trial. Clorox Co. also continued climbing, rising 4.1%, on increased demand for cleaning products.
Several U.S. states and cities have said in recent days that they were closing nonessential businesses, such as movie theaters and nightclubs, to encourage social distancing and help prevent the spread of coronavirus. Public and private schools closed for nearly 30 million U.S. children. The governors of New York, New Jersey and Connecticut tightened restrictions on the public, including banning gatherings of over 50 people, shutting down bars and instituting a recommended curfew.
The closures weighed heavily on markets Monday, some investors said, and exacerbated existing concerns that the U.S. economy could slip into a recession. Consumer spending accounts for nearly two-thirds of the U.S. economy, and it remains unclear what effect a sharp reduction in shopping and dining out will have. Goldman Sachs Group projected Sunday that U.S. gross domestic product will shrink 5% in the second quarter.
“There is going to be a significant hit to economic activity for any country with containment measures,” said Seema Shah, chief strategist at Principal Global Investors. “We’re not going shopping, we’re not going to buy lunch. The impact on smaller and medium-sized businesses is going to be enormous.”
In China, where the virus spread rapidly in early 2020, evidence of economic fallout is a little more clear. Economic statistics for January and February showed that Chinese retail sales, investment in fixed assets and industrial output all fell sharply, and more than economists expected. Output at China’s factories was 13.5% lower in the combined January-February period, compared with the year before.
“It is sending a frightening signal to the other economies,” said Jim McCafferty, joint head of Asia-Pacific equity research at Nomura in Hong Kong. “We will see a similar impact on global GDP numbers.”
Stocks in Shanghai and Hong Kong ended the day down more than 3%. The pan-continental Stoxx Europe 600 closed down 4.9%, paring earlier declines. And Japan’s Nikkei 225 index closed 2.5% lower, even after the Bank of Japan rolled out new measures, including doubling its purchases of exchange-traded equity funds, and said it wouldn’t hesitate to take more action if needed.
The steep fall in stocks globally sent investors scrambling toward U.S. government bonds. The yield on the benchmark 10-year U.S. Treasury note dropped to 0.722% from 0.946% on Friday, the largest one-day yield decline since 2009.
Meanwhile, Brent crude, the global gauge of crude prices, fell 11% to $30.05 a barrel, its lowest level since January 2016. Oil prices have lost more than half their value since the start of the year as investors have grown concerned about waning demand for energy, including jet fuel.
And the Cboe Volatility Index, or VIX, surged higher, surpassing its 2008 record. The index is a closely watched measure of volatility in U.S. stocks. Monday marked the third day in a row that the S&P 500 swung by more than 9%.