The coronavirus stock market plunge could spoil a major party for Wall Street: The bull market’s 11th birthday. Monday, March 9, would the 11-year anniversary of the end of the market’s financial crisis meltdown. Stocks began rising in March 2009 — well before the economy had turned around — and have been climbing steadily since. That came to an end in mid-February when the fears about the spread of the novel coronovirus landed on Wall Street.
Friday suggested the rough ride would continue for Wall Street. Stocks opened sharply lower and bond yields are sinking to more record lows. The Dow fell more than 800 points in the first half hour of trading on Friday. The S&P 500-stock index was down a little over 3% and the technology-heavy Nasdaq composite slid 2.9%.
By 2 p.m. Eastern Time, the Dow was at 25,4983, or down nearly 625 points, or about 2.4%.
The latest stock drop appears to be tied to fear that the economic damage from the spreading coronavirus outbreak will be longer than previously thought.
Not even February’s strong jobs report, which showed that the pace of hiring rose last month as employers added more than 270,000 to their payrolls was enough to lift investors spirits Friday, as many said the economic picture had changed dramatically in just the past few weeks.
Prices of U.S. federal debt rose, and the yield, which moves in the opposite direction of prices, on the 10-year Treasury note dropped to 0.71%, in a sign that investors are looking for safety. Gold prices also rose as investors ducked for cover.
On the other hand, the price of oil fell 3.8% as investors doubted whether OPEC can agree with Russia on cutting production to combat falling demand.
U.S. stocks followed a drop for world stock markets overnight. Pessimism prevailed over hopes that central bank action could counter the economic disruption from the virus outbreak.
The Federal Reserve’s own emergency 0.5% cut in interest rates earlier this week has done little to subdue fears. Markets have endured roller coaster ups and downs for weeks amid uncertainty over how much damage the outbreak of the new coronavirus will do to the global economy. In all, the 500 stocks in the S&P 500 have lost a total market value of nearly $3.8 trillion since the market’s February peak.
“At this point no one can really explain why the markets behave the way they do, and what may be next. The only thing we can say is this high volatility is bad,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
The Chinese government, after shutting down most business and ordering tens of millions of people to stay home in the most stringent mass quarantine efforts ever, has been gradually urging companies to get back to work while taking precautions to protect their employees.
But it’s virtually impossible to know just how close to normal the situation has become in such a vast country. Communist Party officials have a long tradition of embellishing on statistics to fit official targets. The financial magazine Caixin reported some companies are leaving lights and air conditioners running in empty offices and faking work records.
In China, shares have been steadying along with the outbreak, with the Shanghai benchmark gaining nearly 12% since scraping bottom on Feb. 3. But there are doubts about just how quickly businesses will recover.
“Markets have shifted from pricing temporary China weakness to a more protracted global event, which will see a good chunk of global GDP go up in smoke,” Stephen Innes of AxiCorp. said in a report.
That has goaded central bankers into action, but no amount of easy credit will “get people on a flight to Milan or cruise ships to Venice and visiting St. Marks Square,” he said.
