Stocks attempted to rally on Friday, but failed, concluding one of the most volatile weeks on Wall Street ever as investors grapple with mounting fears over the coronavirus’ economic blow.
The Dow Jones Industrial Average traded 620 points lower, or more than 3%, after rallying more than 400 points earlier in the day. The S&P 500 slid 3.4%. The Nasdaq Composite traded 2.7% lower after jumping more than 2%.
Sources told CNBC that Ronin Capital, a clearing firm at the CME Group, was unable to meet its capital requirements. The news weighed on stocks in the final two hours of trading because it was yet another sign of the pressure being put on some firms amid the sharp downturn in markets.
Among the other factors weighing on the market Friday afternoon were an order in New York state for nonessential workers to stay home and a swift reversal in crude prices. The rollover in oil, which has lost half its value in a month, is having a ripple effect, leading investors to sell assets in other markets. Oil gave back a strong gain to settle sharply lower.
“The markets are trading more on emotion than the actual data,” said Sal Bruno, chief investment officer at IndexIQ. “That’s what’s causing the volatility.”
“We’ve seen assets just trade off, really for no good reason, but just because there’s fear,” he said. “When we look back at this, we’ll see how much of this was information-based trading and how much was emotionally based trading.”
The Dow was down more than 15% for the week through Friday afternoon and was on pace for its biggest one-week fall since October 2008, when it slid 18.2%. The S&P 500 has lost more than 13% week to date after dropping another 11.5% last week. The Nasdaq has fallen 10.4%.
Investors got whiplash this week amid the massive daily swings in both directions. The S&P 500 concluded on Thursday a record streak of eight trading days with a closing change of at least 4%. The Cboe Volatility Index (VIX), Wall Street’s preferred fear gauge, closed above 80 earlier in the week, topping its financial crisis peak.
“The volatility, there’s no reason to think it dissipates,” said JJ Kinahan, chief market strategist at TD Ameritrade. “What you really want to see is the market establishing some trading ranges.”
“Right now, I don’t think anyone can say there’s definite support or resistance because the moves have been just so big,” he said.
On Wednesday, the Dow closed below 20,000 for the first time since February 2017. Investors were hoping that was the bottom and that the stock market can recover as virus cases peak in the coming months and government stimulus kicks in. The 30-stock index remained 32% below its all-time high level from February, while the S&P 500 was 29% below its high.
The Federal Reserve announced this week a number of stimulus measures in addition to Congress’ efforts. The U.S. central bank announced Friday it is expanding its asset purchase program to include municipal bonds. These measures, however, haven’t assuaged investors’ fears.
“Market volatility will persist until the government — fiscal or monetary — provides a backstop to stressed corporates and small & medium businesses,” New York Life Investments’ Lauren Goodwin said Thursday. “Support of those functions is vital to ensuring the economic disruption of covid-19, though severe, is temporary.”
In New York on Friday, Gov. Andrew Cuomo ordered 100% of nonessential businesses to work from home. “When I talk about the most drastic action we can take, this is the most drastic action we can take,” he told reporters.
More than 14,000 cases of COVID-19 have been confirmed in the U.S. along with over 200 deaths, according to Johns Hopkins University. Globally, more than 245,000 cases have been confirmed.
As the coronavirus spread Thursday, Bridgewater’s Ray Dalio said the outbreak will cost U.S. corporations up to $4 trillion, and “a lot of people are going to be broke.”
“What’s happening has not happened in our lifetime before. … What we have is a crisis,” the Bridgewater founder said on CNBC’s “Squawk Box.” “There will also be individuals who have very big losses. … There’s a need for the government to spend more money, a lot more money.”
— CNBC’s Yun Li and Eustance Huang contributed reporting.
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