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Stocks fell sharply Wednesday after President Donald Trump warned that a “very, very painful” two weeks lies ahead for the country in face of a rapidly spreading COVID-19 pandemic.
The pandemic has raised fears the world’s largest economy is experiencing an unprecedented disruption to industries, small businesses and households, after leaving U.S. equities with their worst quarterly performance since 2008 in the first quarter.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, -3.96% fell 773 points, or 3.5%, to 21,144. The S&P SPX, -4.19% slipped 97 points, or 3.8%, to 2,488. The Nasdaq Composite COMP, -3.78% shed 243 points, or 3.2%, to 7,457.
Stocks ended lower on Tuesday, capping a quarter that saw stocks tumble from February records into a bear market at record speed. The Dow logged a 23.2% quarterly fall, its biggest first-quarter drop on record and biggest quarterly decline since 1987. The S&P 500 fell 20% for its biggest quarterly selloff since the final three months of 2008. The Nasdaq Composite fell 14.2% for the quarter.
Read: Here’s how the stock market tends to perform after brutal quarters
What’s driving the market?
A continued rise in COVID-19 cases in the U.S. and around the world weighed on equities, with Trump warning late Tuesday that a “very, very painful” two weeks lies ahead for the country. The White House released new projections for 100,000 to 240,000 deaths in the U.S. from the coronavirus pandemic even if current social distancing guidelines are maintained.
See: Dow faces crucial April test as coronavirus pandemic brings ‘blizzard of bad news’
The number of COVID-19 cases world-wide rose to 862,234 on Wednesday, while the number of deaths rose to 42,404 according to data from Johns Hopkins Unviversity. The U.S. has the most number of cases world-wide, at 189,633, and 4,081 deaths.
The uncertainty about when the U.S. can return to usual business has unnerved investors struggling to ascertain the ultimate economic impact of social curbs. Without a clear view on the timeline of a U.S. recovery, volatility was likely to remain heightened in the coming weeks, said market participants.
“Everything hinges on how long we are in this shutdown,” said Anwiti Bahuguna, head of multi-asset strategy at Columbia Threadneedle Investments, in an interview. “We don’t know how long the shutdown may last, so it’s hard to predict what U.S. growth will look like.”
The U.S. labor market saw growing cracks as businesses curtailed hiring and shed workers. Automatic Data Processing reported the U.S. economy lost 27,000 private-sector jobs in March, though the data is expected to be of little use in predicting the official unemployment numbers due on Friday due to distortions created by the pandemic.
In other U.S. data published Wedneday, the IHS Markit final U.S. March manufacturing PMI fell to 48.5 from initial 49.2. A reading of the index below 50 indicates contraction in activity.
The Institute for Supply Management’s March U.S. manufacturing index fell to 49.1% from 50.1% in February, a less severe drop than economist forecasts.
Meanwhile, expectations are growing for another round of fiscal stimulus following the passage last week of a $2 trillion relief package.
As Washington considers other steps for responding to the coronavirus pandemic and the resulting economic damage, Trump and House Speaker Nancy Pelosi both have suggested a “Phase 4” package could include spending on infrastructure.
Which companies were in focus?
Xerox XRX, -7.18% dropped its $35 billion hostile bid for HP Inc. HPQ, -11.32% , saying it was prioritizing its response to the outbreak over all other considerations. The company’s shares were down more than 5.5%.
Shares of T-Mobile US Inc. TMUS, +0.72% were up 3% after the network provider officially closed its merger with Sprint.
Whiting Petroleum WLL, -43.00% filed for bankruptcy and said it had agreed with some of its debtholders to pursue a financial restructuring. Under the proposed terms, it would hand 97% of any new equity to its bondholders. Low crude prices have put oil companies under pressure, raising the likelihood that the U.S. energy sector will see a spate of defaults.
How did other markets trade?
Government bond yields extended their drop, with the yield on the 10-year U.S. Treasury TMUBMUSD10Y, -8.02% tumbling 10 basis points to 0.60%.
Oil prices traded near depressed levels, with the price of a barrel of West Texas Intermediate crude oil CLK20, -1.86% for May delivery was virtually flat at $20.51 a barrel on the New York Mercantile Exchange. In precious metals, gold GCJ20, +0.21% for June delivery rose $6.60, or 0.4%, to trade at $1,590 an ounce on Comex.
The U.S. dollar DXY, +0.61% rose 0.6% against a basket of its major trading partners, according to the ICE U.S. Dollar index.
European stocks traded sharply lower, with the STOXX Europe 600 index SXXP, -2.90% down 2.9%. In Asia overnight, stocks reported similar losses. The China CSI 300 000300, -0.30% was down 0.3%, and Japan’s Nikkei 225 NIK, -4.50% booked a 4.5% decline on Wednesday.
