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The stock market rout intensified on Thursday, with the Standard & Poor’s 500 tumbling into a bear market for the first time since the financial crisis as the coronavirus’s threat to the economy escalated.
The S&P 500 dropped more than 7% in early afternoon trade, the day after President Donald Trump banned travel from Europe to stem the economic fallout from the virus. A series of distressing headlines followed, including suspension of the NBA and NHL seasons.
The U.S. death toll was at 39 Thursday afternoon; there are more than 1,323 confirmed cases.
The Dow Jones industrial average, which fell into bear market territory Wednesday, was down nearly 2,000 points, or 8%.
Amid the market chaos, the Federal Reserve Bank of New York announced plans to inject $1.5 trillion into short-term funding markets in a move widely viewed as an attempt to help boost investor confidence.
Stocks briefly and sharply pared their losses. But they erased those gains as volatility continued.
Market chaos:New York Federal Reserve injects $1.5 trillion into markets
The day’s declines came amid fear that efforts to contain the coronavirus are not enough to prevent widespread economic damages.
The S&P 500 plummeted immediately after the opening bell, triggering an automatic stop to trading for 15 minutes that serves as a cooling-off period. The index would need to drop 13% to trigger a second trading halt.
The index, which professional investors watch closely as a gauge for the health of the markets, fell into a bear market, or a drop of 20% from its peak, putting it on track to end the longest bull market in Wall Street history.
The plunge came 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.
Coronavirus:Dow drops into bear territory for the first time since the financial crisis
European travel ban:Economy, stock markets look even shakier after Trump announces European travel ban
Stocks are likely to remain volatile until there’s some combination of “evidence of successful virus containment, “clarity on the net economic impact” and “a concerted global policy response,” said Mark Haefele, chief investment officer for global wealth management at UBS.
“Currently, the virus remains uncontained in Europe and the US, and, although we have seen some stimulus measures from policymakers, it is unclear if it will prove comprehensive enough to mitigate the economic damage arising from coronavirus containment measures,” Haefele wrote in a note to investors.
Stocks are suffering badly across the board.
Investors are fearful that the economy will suffer from a global slowdown in travel, shopping and other consumer spending.
In the airline business, Delta, Southwest, United and American stocks were down double digits. In the automotive industry, General Motors, Ford, Fiat Chrysler and Tesla were down double digits. In the retail sector, Target, Macy’s and J.C. Penney were down double digits.
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.
European markets were down 10%, even after the European Central Bank announced more stimulus measures. World markets are enduring violent swings amid uncertainty about how badly the outbreak will hit the economy.
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.
In Europe, France’s CAC 40 dropped 9%, while Germany’s DAX lost 8.8%. Britain’s FTSE 100 plunged 8.4%. Japan’s benchmark Nikkei 225 dived 4.4% and Australia’s S&P/ASX 200 dropped 7.4%. Hong Kong’s Hang Seng lost 3.7%.
Contributing: The Associated Press
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