(CBS) — Financial markets opened sharply lower on Friday, putting stocks on track for a seventh straight day of losses as investors brace for the economic fallout from the widening coronavirus outbreak.
The Dow plunged 1,026 points, or 4%, to 24,741 in morning trading, following a nearly 1,200 point drop on Thursday. The broader S&P 500-stock index fell 3.7% in early trading, and the tech-heavy Nasdaq composite declined 3%.
The value of U.S. equities has tumbled more than $3 trillion from their market highs last week amid turbulence caused by the widening virus. The downdraft puts stocks on track for their worst week since October of 2008, when markets cratered during the financial crisis.
More than 83,000 cases of the COVID-19 disease have now been confirmed in 53 countries, with the death toll at more than 2,800. Despite President Donald Trump’s reassurances that the U.S. is in “great shape,” investors are weighing the impact of potential economic disruptions from the disease.
Tech giants such as Apple and Microsoft have warned that the outbreak will hurt their financials, while countries are taking measures to halt the spread of the disease, such as Japan’s decision to close all public schools in that country.
“Markets move sharply when fear and uncertainty are prevalent, and there is plenty of both right now,” said Greg McBride, chief financial analyst for Bankrate.com.
The slide into market “correction” territory — defined as a decline of at least 10% from a previous high — is the fastest on record, noted Torsten Sløk, chief economist at Deutsche Bank Securities. “The speed of the decline over the past week even beats the Black Monday episode in October 1987, where the peak was in August 1987,” he wrote in a research note.
Airline and other travel stocks have been pummeled, with American Airlines and Delta shedding 27% and 17% of their market value, respectively, since last Friday. But Thursday’s rout touched multiple industries, with real estate, consumer staple and health care stocks suffering losses.
Goldman Sachs on Thursday warned clients that the S&P 500 could drop another 9% over the next three months. The firm also said corporate profit growth is likely to vanish this year because of the coronavirus, and that U.S. economic growth would slow.
The sharp decline has investors looking to the Federal Reserve for help, analysts said.
“The global equity rout remains relentless,” TD Securities analysts told investors in a report. “With no less than three Fed rate cuts now priced in for this year, investors are starting to look to central bankers for rescue once again.”
On Friday, St. Louis Fed President James Bullard said further rate cuts are “a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza.”
But, Bullard added, “this is not the baseline case at this time.”
Even Fed chairman Jerome Powell weighed in Friday afternoon, releasing a statement to help ease investor concerns that could ultimately infect the broader economy.
“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity,” Powell said in the statement. “The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”
Stocks at least stopped sliding after the statement was released.
First published on February 28, 2020 / 9:46 AM
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