Steep sell-off highlights fears that Washington’s response won’t be enough.
Stocks plunged on Wednesday, with the Dow Jones industrial average falling into a bear market, in a drop that reflected investors’ fear that Washington won’t be able to muster a response to the economic crisis triggered by the spreading coronavirus.
A bear market begins when stocks have fallen 20 percent from their high. Though it’s a somewhat arbitrary threshold, in financial markets the designation acknowledges what many investors are surely feeling — that fear-based trading in the stock market may not end soon.
The last time stocks in the United States were in a bear market was during the height of the financial crisis, more than a decade ago.
The S&P 500 fell nearly 5 percent on Wednesday, while the Dow dropped nearly 6 percent. From its February high, the S&P 500 is down 19 percent, while the Dow is down 20 percent.
Asian markets followed Wall Street lower on Thursday, with losses steepening after President Trump suspended travel from Europe to the United States for 30 days.
Shares in Tokyo fell nearly 4 percent, and Hong Kong opened 3.3 percent lower. Losses in Australia also accelerated, and its main stock index was down nearly 5 percent by midday there.
Drooping crude oil prices also worsened. Futures tracking West Texas Intermediate, the American crude benchmark, were down 5 percent to about $31.30 a barrel.
Treasury bond prices rose, sending yields lower.
Stocks have whipsawed this week as investors vacillated between the threat that the coronavirus poses to the global economy and the hopes that governments around the world will unveil a series of measures to help businesses. On Wednesday, World Health Organization officials officially designated the spread of the coronavirus as a global pandemic.
President Trump has signaled he would consider ways to stimulate the economy, and lawmakers and administration officials spent the day Wednesday outlining their possible steps. Options include cutting payroll taxes and extending the American tax filing deadline past April 15. But so far, the White House has not announced any specific measures, and most experts say a payroll tax cut is not an effective way to combat the problems facing the economy.
“What we’ve seen over the past 36 hours is hope for something from a fiscal policy perspective and then this sense that it’s not going to come, or it’s not thought out, so I think that’s the disappointment right now,” said William Delwiche, an investment strategist at Baird, an investment banking and money-management firm based in Milwaukee.
That the virus is unlikely to prove fatal to the vast majority of people who get it offers little comfort to financial markets. Rather, the worry is that efforts to contain the spread of the illness caused by the virus are certain to slow the global economy and corporate profits.
These stocks are the hardest hit.
The worst-performing stocks on Wednesday cut across industries, reflecting how broad the concern among investors was.
With oil falling again, energy stocks like Apache Corporation and Occidental Petroleum led the slide in the S&P 500. Apache fell about 24 percent, while Occidental fell 18 percent.
Boeing tumbled 18 percent, the biggest drop among components of the Dow Jones industrial average. A person with knowledge of the matter said the carrier planned to drawdown a $13.8 billion credit line to shore up its cash position in the face of uncertainty over the coronavirus outbreak. Boeing also reported that it had lost more orders for its grounded 737 Max.
Boeing’s top executives said in a letter to employees that the company was facing a “global economic disruption” caused by the outbreak. As a result, the company is limiting travel and discretionary spending, restricting overtime and freezing hiring until further notice, they said.
And companies dependent on travel and tourism continued to fall. Norwegian Cruise Line fell 27 percent, and MGM Resorts fell 13 percent. Earlier Wednesday, the Global Business Travel Association said the coronavirus epidemic stood to wipe out more than $820 billion in spending on global business travel.
Wall Street executives tell Trump this is not 2008.
Top Wall Street executives, summoned to a Wednesday meeting with President Trump, said that the banking system was strong and that the current market turmoil was not akin to the 2008 financial crisis.
“This is not a financial crisis,” Citigroup’s chief executive, Michael L. Corbat, told the president. “The banks and financial system are in sound shape and the banks are here to help.”
The Bank of America chief executive, Brian Moynihan, agreed, saying: “We’re very strongly capitalized. We are in a great position.”
Mr. Trump appeared to lament the end of the bull market. He referred to last week’s jobs numbers as strong and said additional numbers coming in suggested the economy was still running smoothly.
“Now we’re hitting a patch,” he said. “And we’re going to have to do something with response to this virus.”
Amtrak cuts service and asks workers to take unpaid leave.
Coronavirus concerns have had a drastic effect on Amtrak, causing the railroad to reduce service and ask employees to take unpaid leaves, according to an internal memo from the railroad’s chief operating officer, Stephen J. Gardner.
“Ridership and revenue have declined sharply over the past few weeks,” Mr. Gardner wrote, adding that the reductions had “accelerated in recent days and will likely continue for some time.”
Bookings were down 50 percent from last year and cancellations were up 300 percent, he wrote.
“At this rate,” Mr. Gardner wrote, “we believe we will likely suffer the loss of several hundred millions dollars in revenue during this fiscal year, and we might lose more.”
The blow to Amtrak’s business came as its financial performance had been improving and its executives had expected to report its first operating profit this year. Amtrak, which owns and operates Pennsylvania Station in Manhattan, had already suspended three daily nonstop trains between New York and Washington.
N.Y. Fed works to make sure money flows smoothly.
The Federal Reserve Bank of New York on Wednesday expanded the size of its so-called repurchase operations, which are essentially short-term loans to eligible banks. The New York Fed has been carrying out market interventions since October to keep money flowing smoothly between banks and other financial institutions.
Starting Thursday and continuing through April 13, the Fed will offer at least $175 billion in daily overnight repo operations — up from $150 billion — and at least $45 billion in two-week repo operations twice a week, according to the statement.
The Fed will also offer three one-month repo operations of at least $50 billion.
“These operations are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures,” the New York Fed said in a statement.
It was the second time this week that the Fed ramped up its offering of repurchase agreements and came as investors are increasingly concerned about proper functioning of the financial system. Some economists are expecting the Fed to do more in the coming week, like mobilizing swap agreements that help foreign central banks keep dollar funding flowing in their economies or announcing an extension to the Fed’s Treasury bill purchase program.
The coronavirus is hitting consumer confidence.
The spread of the coronavirus, along with the tumult it is stirring in financial markets, has begun to drag on consumer confidence, according to a nationwide poll conducted by the online research firm SurveyMonkey for The New York Times.
The poll found the largest single-month drop in confidence since President Trump took office, driven by rising concern about the nation’s economic outlook. The decline was evident among Republicans, Democrats and independent voters alike.
Still, more people (39 percent) expected very good or somewhat good business conditions in the coming year than those who expected very bad or somewhat bad conditions (22 percent).
The polling was begun last week and completed on Sunday, so it does not reflect any further impact from this week’s market upheaval.
High consumer confidence has buoyed Mr. Trump’s presidency. But Mr. Trump’s performance rating in the survey slipped this month, with 51 percent of respondents registering disapproval — including 40 percent who disapproved strongly of how he was handling the job.
Here’s what else is happening.
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The actor Tom Hanks said on Wednesday that he and his wife, Rita Wilson, learned they had the coronavirus. The 63-year-old Academy Award-winning actor is in Australia, where he was set to film a movie about the life of Elvis Presley.
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Trump administration officials met on Wednesday with Facebook, Google, Amazon, Twitter and others about how they could help the efforts to stem the spread of the coronavirus. Officials told the companies that the government would soon launch a research database and asked them to develop tools that could help researchers delve into the data.
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The Federal Aviation Administration said on Wednesday that it would allow airlines to run fewer flights without running the risk of losing their coveted slots at some busy airports.
Reporting was contributed by Peter Goodman, Alan Rappeport, Ben Casselman, Alexandra Stevenson, Ben Dooley, Niraj Chokshi, Patrick McGeehan, Kevin Granville, Jeanna Smialek, Carlos Tejada, Jim Tankersley, Matthew Goldstein, Jack Ewing, John Koblin and Marc Tracy.