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U.S. stocks teetered on the edge of a bear market Wednesday as worries persisted over economies reeling from the coronavirus outbreak.
The World Health Organization declared the virus a global pandemic Wednesday. Countries are shifting into damage-control as infections spread, prompting sweeping controls on travel, closures of schools and cancellations or postponements of sports events and many other public activities.
The Dow Jones industrial average dropped 1,200 points, nearly erasing Tuesday’s gains after the blue-chip average jumped 1,167 points.
Wednesday’s rout added to recent losses and left the Standard & Poor’s 500 down nearly 20% – almost bear territory – from its record. The broad index shed 4.2%, leaving it off about 18.4% from its Feb. 19 high. The Nasdaq Composite shed 3.9%.
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The speed of the market’s declines and the degree of its swings the last few weeks have rattled investors. It was only three weeks ago that the S&P 500 set a record high, and the Dow has had six days where it swung by 1,000 points since then. It’s done that only three other times in history.
“Investors are still worried that those fiscal stimulus packages may not be able to contain the virus outbreak as well as to mitigate the impact on the economy,” said Louis Wong of Philip Capital Management.
The Bank of England cut its key interest rate by half a percentage point to 0.25% as an emergency measure in response to the outbreak of the deadly virus. The central bank said the move would “help support businesses and consumer confidence at a difficult time.”
President Donald Trump said late Monday he will seek financial relief for workers and businesses affected by the coronavirus outbreak, as new cases were reported across the country.
Concerns have grown that a prolonged outbreak may bring on a recession. The total of confirmed cases neared 120,000, with more than 80,900 in mainland China, where the virus has killed more than 3,100 people. The number of confirmed cases in the U.S. surpassed 1,030 as of early Wednesday.
Goldman Sachs forecast that the longest-ever bull market “will soon end” after 11 years. It also lowered its profit forecast for the S&P 500 index, the broadest measure of the U.S. stock market, citing lower crude oil prices and interest rates.
“Both the real economy and the financial economy are exhibiting acute signs of stress,” analysts at Goldman Sachs said in a note. “Supply chains have been disrupted and final demand has declined for many industries. Travel is contracting sharply as both individuals and businesses restrict movement.”
The bank cut its mid-year outlook for the S&P 500 to 2,450, with expectations the stock market will drop another 15% from Tuesday’s close.
Perhaps the best gauge of confidence in the economy on Wall Street recently, Treasury yields, also pulled back. The yield on the 10-year Treasury fell to 0.70% from 0.75% late Tuesday.
Oil prices, which plunged 25% on Monday amid a price war between producers, have steadied in the past two days. Brent crude, the international standard, fell 32 cents to $36.90 per barrel. It rose $2.86, or 8.3%, to $37.22 a barrel on Tuesday. Benchmark U.S. crude fell 48 cents to $33.88 a barrel. It rose $3.23 to $34.36 a barrel on Tuesday.
In Europe, France’s CAC 40 gained 0.4%, while Germany’s DAX edged up 0.1%. Britain’s FTSE 100 fell 0.6%. Japan’s benchmark Nikkei 225 lost 2.3%. Australia’s S&P/ASX 200 plunged 3.6%.
Contributing: The Associated Press.
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