U.S. stock markets fell the most since 1987 in early trading on Monday, having been suspended, limit down, almost immediately after trading started, as the shutdown of increasing swathes of public life in the U.S. brought home the scale of the coronavirus outbreak.
By 9:50 AM ET (1350 GMT), the Dow Jones Industrial Average was down 2,773 points or 12% at 20,393 points. The S&P 500 was indicated down 10.7% and the Nasdaq Composite was down 11.5%.
Investors weren’t reassured by the emergency measures taken on Sunday night by the Federal Reserve, which cut the target range for fed funds to near zero and signalled $700 billion in asset purchases to keep financial markets orderly.
The Fed also said it would extend the availability of dollars internationally through swap facilities with other central banks.
“The Fed has pulled out all the stops. But in the end the underlying driver of this crisis is very different from 2008/9, i.e. this is about COVID-19,” said Robin Brooks, an economist with the Institute for International Finance in Washington, DC. “That means the Fed can alleviate the symptoms, but it’s unreasonable to expect the crisis to go away on Fed action.”
Earlier on Sunday, Treasury Secretary Steven Mnuchin urged investors to look beyond the short-term hit to the economy, telling CNBC that “There will be a huge amount of pent up demand when this is done. And it will be done.”
However, Mnuchin also warned that “the goal is not to bail out companies,” a line that appeared to raise the risk of near-term bankruptcies, especially in the transport and oil sectors.
Among the worst hit were airline stocks. United Airlines stock fell over 15% after saying it would slash capacity by 50%, while Delta Air Lines (NYSE:DAL) stock and American Airlines (NASDAQ:AAL) stock also fell heavily after the Trump administration expanded restrictions on arrivals from Europe to include the key routes serving London and Dublin.
Apple (NASDAQ:AAPL) stock fell as much as 13% before rebounding to be down only 9.7% after the company said it will shut all its stores outside China. It was also hit by a $1.2 billion antitrust fine in France.
Oil and gas stocks tumbled again as crude prices fell below $30 a barrel and U.S. gasoline prices fell to an all-time low of 69 cents a gallon.
Banks were also badly hit, as the Fed’s action threatened to crush lending margins without, at least in the short term, supporting income from currency and securities markets. Bank of America (NYSE:BAC) stock fell 14.6%, while JPMorgan (NYSE:JPM) stock fell 15.1% and Citigroup (NYSE:C) stock fell 19.7%.
Casino operators MGM Resorts (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN) also both fell after the pair announced they would temporarily close their casinos in Las Vegas, essentially putting much of the famous strip under lockdown.