The Dow Jones Industrial Average crossed a milestone on Wednesday, with the index erasing all of its gains since United States President Donald Trump took office, as coronavirus fears continue to inject unprecedented volatility into the market.
The Dow was trading down more than 1,800 points or 8.6 percent around 1:15pm Eastern Time (17:15 GMT), falling below 20,000 in choppy trading. It has taken just over a month for the 30-share index to lose more than 30 percent of its value.
The broader S&P 500 – a gauge for the health of US retirement and college savings accounts – dropped below the 7 percent level around 1pm ET in New York (17:00 GMT), tripping circuit breakers that halt trading for 15 minutes.
The Nasdaq Composite Index was down 6.6 percent.
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Wednesday marked a sharp reversal from Tuesday, when more emergency moves by the US Federal Reserve to unclog credit markets – and details of the White House’s one-trillion-dollar stimulus plan for countering the disruptions of coronavirus – helped lure buyers back into stocks.
But Tuesday’s gains were modest and not nearly enough to help the major indexes dig out completely from Monday’s historic losses that saw the Dow close nearly 3,000 points lower.
With coronavirus now being reported in all 50 US states, uncertainty over the extent of the economic damage the outbreak will leave in its wake has analysts and economists scrambling to reassess forecasts made less than a week ago and injecting a healthy dose of hedging into predictions for how the second half of the year could shake out.
“The rapid escalation of measures to contain the coronavirus outbreak suggests that the economic damage will be even larger than we anticipated only a few days ago, and we are now pencilling in a 10% annualised decline in GDP in the second quarter.” Andrew Hunter, senior US economist at Capital Economics, wrote in a note on Wednesday. “For now we expect activity to begin to rebound over the second half of the year, but that will depend on the virus being brought under control over the next few months and on Congress stepping up to the plate with a substantial fiscal response.”
Investors are also becoming concerned as more firms draw on credit lines to weather the coronavirus onslaught. And though talk of government stimulus packages and bailouts for certain industries, such as airlines, is intensifying, many analysts are concerned about how politics could slow the delivery of measures.
“The markets are unlikely to be very patient for this process, keeping open the risk that something breaks before politicians come together on a credible deal that sets the stage for a recovery once the virus restrictions start to be lifted,” Steven Ricchiuto, US chief economist at Mizuho Securities USA, wrote in a note on Wednesday.
Shares of Boeing Co continue to get pummelled, falling more than 22 percent in early afternoon trading after the aircraft maker called for a $60bn bailout for aerospace manufacturers reeling from a sharp collapse in international travel triggered by the pandemic. Boeing shares are down more than 70 percent from their 52-week high.
