The Standard and Poor’s 500 slid into bear territory Thursday for the first time since the financial crisis after President Donald Trump banned travel from Europe to stem the economic fallout from the coronavirus, a move that threatened further disruption to the global economy.
The S&P 500 fell 7% shortly after the opening bell, triggering an automatic shock absorber for 15 minutes. The broader index, which professional investors watch more closely, fell into a bear market, or a drop of 20% from its peak, which puts it on track to end the longest bull market in Wall Street history. The Dow Jones industrial average fell into bear market territory Wednesday.
The Dow cratered nearly 1,700 points Thursday after Trump announced in an address late Wednesday that all travel from Europe to the U.S. is banned for 30 days to limit the spread of the deadly virus. The Nasdaq Composite shed 7%, also joining the other indexes in bear territory.
Trump’s announcement of travel restrictions for most European countries added to concerns over disruptions to travel and trade, while the World Health Organization’s warning over “alarming levels of inaction” by governments in corralling the virus further raised the alarm.
“Markets reacted negatively to what was perceived as a solemn but confused speech that placed blame on other nations, omitted to focus on immediate actions to relieve the most affected individuals, and lacked in concrete fiscal and health measures to address the economic and financial impact of the virus,” Gregory Daco, chief U.S. economist at Oxford Economics, said in a note.
Some economists questioned whether interest rate cuts from the Federal Reserve will be enough to ward off the economic impact from the virus that threatens to disrupt global supply chains.
The central bank made an emergency rate cut last week, the first outside of a regularly scheduled meeting since the global financial crisis. But it did little to calm jittery investors, who are debating whether those methods can still prod Americans that are fearful of contracting the virus to visit malls and restaurants.
“Investors want to see real evidence that these measures are working,” says Hollis Brewer, Founder & CEO at Hollistic Capital Management. “Based on standard economic theory, this should be helping, but it’s not. The fact that these standard measures don’t appear to be working is driving investor fear.”
Industry trade group Airlines for America warned Trump’s travel measure would hit the U.S. airline industry “extremely hard.” Airlines for America had previously forecast the virus could threaten to wipe out between $63 billion and $113 billion in global airline revenues this year.
“The ban will undoubtedly further impact demand for oil,” Jack Allardyce, oil and gas analyst at Cantor Fitzgerald Europe, said in a note. “The most direct effect will be on jet fuel demand.”
A plunge in crude prices is hurting profits for energy companies.
Benchmark U.S. crude lost $1.64 to $31.35 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.38 to $32.98 per barrel on Wednesday. Brent crude, the standard for international pricing, gave up $1.76 to $34.03 per barrel.
Treasury yields, one of the loudest alarm bells on Wall Street about the economic risks of the crisis, remain well below 1%, with the yield on the 10-year Treasury at 0.74% from 0.83% late Wednesday.
Global shares plunged Thursday after the World Health Organization declared a coronavirus pandemic and indexes sank on Wall Street.
France’s CAC 40 slipped 6.6% to 4,307.17, while Germany’s DAX lost 6.8% to 9,732.75. Britain’s FTSE 100 plunged 5.7% to 5,542.17.
Contributing: The Associated Press