U.S. stocks sank again on Wall Street Friday, pushing the S&P 500 index down another 2.8% and putting the market on track for its worst week since October 2008.
The virus outbreak has been shutting down industrial centers, emptying shops and severely crimping travel all over the world. More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.
The market's losses moderated somewhat after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in mid-March.
Confirmed Coronavirus Cases
Source: NBC News, staff reports
The Dow Jones Industrial Average fell 869 points, or 3.4%, to 24,897 as of 3:36 p.m. Eastern time. It was down as many as 1,085 points in early trading.
The S&P 500 is now 14.5% below the record high it reached just 10 days ago. Overseas markets also fell. China’s benchmark index fell 3.7% and Germany’s DAX fell 3.9%.
The rout has knocked every major index into what market watchers call a “correction,” or a fall of 10% or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were heavily overpriced and long overdue for another pullback.
Financial, health care and technology stocks were among the biggest losers in Friday's broad market slide. Energy, the worst-performing sector this year, held up best.
Bond prices soared again as investors sought safety and became more pessimistic about the economy's prospects. That pushed yields to more record lows. 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.
Crude oil prices sank 4.9% over worries that global travel and shipping will be severely crimped and hurt demand for energy. The price of benchmark U.S. crude has now fallen 15% this week.
“All this says to us is that there are still a lot of worries in the market,” said Gene Goldman, chief investment officer at Cetera Financial Group. “We need the Fed to come out and say basically guys, we got your back.”
Coronavirus Outbreak Coverage
Traders have been growing more certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon. Goldman said the Fed’s current lack of action amounts to a tightening of rates compared with other nations and their actions to offset the impact of the coronavirus.
Investors now widely expect the Fed to cut interest rates by a half-point at its meeting that winds up March 18. According to data from CME, the expectations for a half-point cut jumped from 47% just before the Fed's statement was released to 100% shortly thereafter.
The latest losses have wiped out the S&P 500's gains going back to early October. The benchmark index is still up 4% over the past 12 months, not including dividends.
The weeklong market sell-off follows months of uncertainty about the spread of the virus, which hit China in December and shut down large swaths of that nation by January. China is still the hardest-hit country and has most of the 83,000 cases worldwide and related deaths.
Uncertainty turned into fear as the virus started jumping to places outside of the epicenter and dashed hopes for containment.
"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.
Airlines have suffered some of the worst hits as flight routes are 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 an impact to their bottom lines.
Cruise operators have also been hard hit, with shares sinking 30% or more as shipboard infections rose. But 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 2.8%, while Norwegian Cruise Line Holdings gained 5.1%. Carnival's shares climbed 3.3%.
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 huge role in keeping the U.S. expansion going — to contract again.
Craig Johnson, president of Customer Growth Partners, a consumer consultancy, says he had expected annual retail sales to be up 4.1%, but he now says it could increase just 2.2% if the impact of the new virus in China persists beyond April.
‘’This is a moving target right now,”’ he said. ‘’There is a lot of uncertainty.’’
Nitin Jain, managing director of the retail practice at AlixPartners, said that while sales of everyday items like canned goods and medical supplies could increase in the short term, sales of luxury goods could tail off as high-end shoppers become nervous.
Many companies face the prospect of crimped financial results with their stocks already trading at high levels relative to their earnings. Before the virus worries exploded, investors had been pushing stocks higher on expectations that strong profit growth was set to resume for companies after declining for most of 2019. If profit growth doesn’t ramp up this year, that makes a highly priced stock market even more vulnerable.
Nearly 60 nations representing every continent, except Antarctica, have confirmed cases. The virus outbreak has prompted a wide range of reactions from nations hoping to contain its spread and economic impact.
The Geneva auto show was canceled as Swiss authorities banned large events of more than 1,000 people. Parts of Italy’s northern industrial and financial center remain under quarantine. Japan is preparing to close schools nationwide. The U.S. is preparing for the virus after a case unrelated to travel was confirmed in California.
AP Retail Writer Anne D'Innocenzio contributed.