Any hopes that the coronavirus-induced volatility that has slammed the markets recently could be overcome this week were dashed in dramatic fashion on Monday.
The Dow Jones Industrial Average ended the day down more than 2,000 points, or 7.8%, while the S&P 500 fell 7.6% and the Nasdaq Composite dropped 7.3%—losses that kept the market drifting ever closer to bear territory. It was the summation of a wild, brutal day on Wall Street, one that saw automated circuit breakers halt trading across the entire market for 15 minutes on Monday morning after the S&P 500 plunged 7% from its previous close.
The circuit breakers, which took effect for the first time since 1997, underscored fears that the current, post-recession bull market—which began 11 years ago to this day, on March 9, 2009—has all but come to a close. The Dow had its biggest percentage drop since the height of the financial crisis in 2008 (and its single-largest points drop in history) and closed more than 19% off its all-time high in early February—with official bear-market territory, defined as a 20% decline from a recent peak, only another 210-point dip away. Likewise, the S&P 500 and Nasdaq Composite both ended the day down 19% off their own recent peaks in early February.
Besides the coronavirus outbreak, a crude oil price war between the Saudi Arabia-led OPEC and Russia sent oil plummeting nearly 25% on Monday, with the West Texas Intermediate (WTI) and Brent crude benchmarks both having their worst day since the midst of the Gulf War in 1991. Meanwhile, the yield on the 10-year Treasury note—which dipped below 1% for the first time last week—slipped close to a once-unthinkable 0.5% as investors flocked to the safety of government bonds.
That had the effect of battering the S&P 500’s energy sector, which lost an eye-watering 20% of its value on Monday, while the index’s financials sector also fell nearly 11% as banks and financial services firms felt the squeeze of lower yields. Last week’s emergency interest rate cut by the Federal Reserve has so far failed to calm the markets, and many economists now expect the central bank to continue slashing rates when it meets next week and again in April.
The steep declines in New York echoed those seen in the global markets earlier on Monday. Tokyo’s Nikkei 225 lost 5% while Hong Kong’s Hang Seng was down 4% and Shanghai’s SSE Composite fell 3%. In Europe, London’s FTSE 100 and Frankfurt’s DAX were both down 8%, while the pan-European STOXX 600 lost more than 7%.
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