Coronavirus panic tightened its grip on global markets Friday as the escalating outbreak drove stocks to their worst weekly loss since the 2008 financial crisis and prompted the Federal Reserve to take the unusual step of issuing a statement to reassure Americans.
The Dow Jones Industrial Average plunged 1,000 points in the morning, swinging widely throughout the session. It closed down 357 points, or 1.4%. The Standard & Poor's 500 index shed 0.8% while the Nasdaq rallied to end flat.
The 10-year Treasury yield, a key marker in global finance, also hit a record low Friday, a sign that investors are fleeing equities for the safety of bonds.
Experts said the panic caused by the coronavirus needs to play itself out.
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"The lights went out on the stock market in February," said Chris Rupkey of MUFG Bank. "Wall Street can panic, but until Main Street panics, we are not going to get a recession. If the broader economy doesn't take a hit, companies don't lay off people and consumers don't stop buying homes and cars, then this sell-off is too far ahead of itself."
As stocks dived this week, calls have grown from prominent investors for the Federal Reserve to cut interest rates, a move that usually calms markets. Wall Street traders are now betting on at least three rate cuts this year, including one reduction at the Fed's next meeting in mid-March. Interest rates are currently just below 1.75%, a low level by historical standards, but higher than the rates in many other parts of the world.
Fed Chairman Jerome Powell gave no hints Friday about a possible rate cut but said the Fed would take action if the economy takes a hit from the coronavirus.
"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity," Powell said. "The Fed is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."
White House Economic Adviser Larry Kudlow suggested investors "buy the dip."
Some investors were glad to see the end of February after the stomach-churning slides of the past several days.
"Investors had a love-hate relationship with risk in the month of February," said Kristina Hooper, chief market strategist at Invesco. "The first several weeks of the month saw investors embracing stocks. Then as worries grew about the coronavirus outbreak, market participants spent the past six trading days in panic mode. I suspect it will take reassurances from the Fed to stabilize markets."
Friday's finish capped a blistering week on Wall Street. All three major U.S. indexes finished in correction, which signals a 10% reversal from recent highs and heightens investor worries of a runaway slide. The Dow and the S&P 500 had their worst weeks since the financial crisis, according to S&P Dow Jones indices.
The Dow plunged 12% for the week, and two of the biggest losers were American Express, which went down 20%, and Boeing, which shed 17%. The S&P 500 lost 11.5% over the five days, while Nasdaq fell 10%.
All 11 S&P 500 stock market sectors are in a correction, which means that equity investors have no place to hide from the carnage. Energy and technology stocks were among the worst hit.
The latest losses have wiped out the S&P 500's gains going back to October. The benchmark index is still up 6.1% over the past 12 months, not including dividends.
Since Feb. 19, U.S. stocks have lost nearly $3.6 trillion in value.
Bond prices soared again Friday as investors sought safety. The yield on the 10-year Treasury note fell sharply, to 1.14% from 1.30% late Thursday. That's a record low, according to TradeWeb. That yield is a benchmark for home mortgages and many other kinds of loans.
The sell-off follows months of uncertainty about the spread of the virus, which hit China in December and shut down large sections of that nation by January.
Uncertainty turned into fear as the virus started jumping to places outside of the epicenter and dashed hopes for containment.
Airlines have suffered some of the worst hits as flight routes have been canceled, along with travel plans. Big names like Apple and Budweiser brewer AB InBev are part of a growing list of companies expecting financial pain from the virus. Dell and athletic-wear company Columbia Sportswear are the latest companies expecting a jolt to their bottom lines.
Cruise operators also have been hard hit, with shares sinking 30% or more as shipboard infections rose. But those companies were having a far better day Friday, with some on Wall Street believing that the sell-off was overdone. Shares of Royal Caribbean Cruises rose 4.4%, while Norwegian Cruise Line Holdings gained 7.3%. Carnival's shares climbed 5.1%.
On Friday, the Dow fell 357.28 points to 25,409.36. The S&P 500 slid 24.54 points to 2,954.22. The Nasdaq rose 0.89 points, or less than 0.1%, to 8,567.37. The Russell 2000 index of smaller company stocks lost 21.44 points, or 1.4%, to 1,476.43.
In commodities trading, benchmark crude oil fell $2.33 to settle at $44.76 a barrel. Brent crude oil, the international standard, dropped $1.66 to close at $50.52 a barrel. Wholesale gasoline fell 2 cents to $1.39 per gallon. Heating oil was unchanged at $1.49 per gallon. Natural gas fell 7 cents to $1.68 per 1,000 cubic feet.
The energy sector was down 20% on the week and nearly 25% on the year. "Energy is the main killer," said Howard Silverblatt of S&P Dow Jones indices. "It's devastating."
Oil suppliers are hoping for a boost in demand from possible supply cuts at a meeting Thursday and Friday of OPEC and allies like Russia.
Gold fell $75.90 to $1,564.10 per ounce, silver fell $1.27 cents to $16.39 per ounce and copper fell 2 cents to $2.55 per pound.
The dollar fell to 108.42 Japanese yen from 109.95 yen on Thursday. The euro weakened to $1.0967 from $1.0987.
Global markets also took a beating Friday. In Japan, the Nikkei tumbled 3.7% as officials declared a state of emergency in the northern island of Hokkaido and doubts were cast about this summer's Tokyo Olympics. Hong Kong's Hang Seng dived 2.5%, and the Shanghai composite skidded 3.7%.
European markets were in the same boat, into correction for the week.
The outbreak has upended daily routines and business operations around the world.
"If the virus spreads quite a bit, the market will work through a bad quarter or two of bad economic activity," said Scott Wren of Wells Fargo Investment Institute. "It's all about whether people are going to be out there spending or if they are going to be home hiding."
This week's swift Wall Street sell-off erased one-third of stocks' gains since President Donald Trump's 2016 election. And while public-health officials scramble to contain what appears to be inevitable spread in the United States, the government finds itself battling an economic emergency that could threaten the nation's record economic expansion.
A big concern investors have is that the stock market rout could have a psychological effect on consumers, making them reluctant to spend money and go to crowded places like stores, restaurants and movie theaters.
The late-2018 stock market plunge, for instance, derailed holiday sales that year. Now, analysts are worried that the latest stock swoon could cause consumer spending -- which makes up some 70% of the economy and has played a big role in keeping the U.S. expansion going -- to contract again.
"Fear is a stronger emotion than hope," said Ann Miletti, head of active equity at Wells Fargo Asset Management. "This is what we're seeing today and this week and over the past seven days."
Information for this article was contributed by Thomas Heath, Rachel Siegel, Heather Long and Adam Taylor of The Washington Post; by Alex Veiga and Damian J. Troise of The Associated Press; and by Jeremy Herron and Vildana Hajric of Bloomberg News.
A Section on 02/29/2020