Could coronavirus usher in a bear market for stocks?

Stock market corrections, on average, result in drops of 14%


The record-long bull market, which for 11 years has dodged existential threats from trade wars to real wars, is now confronting a risk that it might not be able to overcome: the coronavirus.

A drumbeat of negative news about the spreading virus’ negative impact on the economy, which led to heavy selling and a trading halt early Monday after the broad market fell 7%, has put the U.S. stock market on the precipice of its first bear market since the financial crisis.

A bear market is defined as a drop of 20% or more from a prior closing high. At the Standard & Poor’s 500 low of 2,740.35 Monday morning, it was down 19% from its Feb. 19 record high of 3,386.15.

The financial fallout from the coronavirus has been fast and furious. The spread of the deadly virus around the globe has frozen economic activity in parts of China and Italy, prompting economists and stock market pros to raise the odds of recession to reflect a world where consumers are hunkering down, avoiding public places, traveling less and curtailing spending.

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The plunging Dow Jones industrial average – which was down by more than 2,000 points in trading Monday — is a symptom of a battered market trying to handicap how bad the coronavirus-led hit to the economy will be. Other signs of trouble include today’s 20% drop in oil prices and the yield on the U.S. 10-year Treasury—known as a haven in tough times—falling to a new record low of 0.38%, down sharply from its recent 52-week high of 2.67% in March 2019.


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By Javier Manning

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