NEW YORK: Wall Street tanked on Thursday, slamming the book on the longest-ever US bull market after new travel restrictions to curb the Covid-19 coronavirus spread spooked investors and rattled world markets.
President Donald Trump’s Europe travel ban, announced late on Wednesday, sent all three major US stock indexes into a tailspin, with the S&P 500 and the Nasdaq confirming their first bear market since the financial crisis.
The Dow Jones Industrial Average fell 2,352.6 points, or 9.99 per cent, to 21,200.62, the S&P 500 lost 260.74 points, or 9.51 per cent, to 2,480.64 and the Nasdaq Composite dropped 750.25 points, or 9.43 per cent, to 7,201.80. The S&P 500 Energy index lost 12.3 per cent.
All 11 major sectors of the S&P 500 closed sharply lower.
The blue chip Dow suffered its worst one-day loss since Oct 1987’s “Black Monday.”
The benchmark S&P 500 and the Nasdaq have lost over a quarter of their value since reaching record closing highs just 16 sessions ago, as nations around the world grapple with how to contain the fast-moving coronavirus and its economic effects.
A bear market is confirmed when an index sinks 20 per cent or more below its most recent closing high.
“The continued negative action in the market is telling us whatever’s been done so far hasn’t been enough,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “People can’t point to a tangible outcome that’s going to restore normal daily life, so uncertainty remains.
“Prominent organisations, educational institutions and even sports leagues are foregoing events out of caution,” Sroka added. “Leading institutions around the world are setting the tone. We’re cautious because they’re telling us to be cautious.”
Trump’s sweeping travel restrictions, limiting flights from continental Europe to the United States, sent European shares to a near four-year low and slammed airline stocks, already battered by the spread of Covid-19.
On Wall Street, airlines plummeted 19.6 per cent.
Boeing Co fell another 18.1 per cent as JP Morgan abandoned its long-term backing for the company’s shares, setting the planemaker on course for its worst week ever.
The US Federal Reserve is expected to cut interest rates for the second time this month at the conclusion of its two-day monetary policy scheduled for next week.
US Treasury yields tumbled as anticipation grew for aggressive easing on the part of the Fed.
The New York Federal Reserve announced on Thursday that it would introduce US$1.5 trillion in new repo operations this week.
“Any government action that has dollars tied to it that’s actionable for the banking system will be viewed as a positive,” Sroka said. “But what the market is looking for is tangible evidence that the government is trying to stave off a recession.”
Interest rate-sensitive bank shares dropped 10.5 per cent, while corporate credit worries hit bond fund prices as companies began to draw on credit lines.
The CBOE Volatility index, a gauge of investor anxiety, shot up to levels not seen since Nov 2008, the height of the financial crisis.
The Trump travel ban also hit oil prices, sending front-month Brent crude down 8.6 per cent. Oil prices were already under pressure after Saudi Arabia and Russia vowed to boost production, flooding the market with supply despite plummeting demand. - REUTERS