Dow drops below 20,000, US stocks head for worst week since 2008

United States stock markets turned negative in afternoon trading on Wall Street, putting all three major US indexes on track for their worst week since the 2008 financial crisis.

A flood of cheap money from central banks and signs of momentum behind a second, larger economic rescue package to help cushion the economic blow from coronavirus helped propel all three major indexes to a positive open, but pessimism and volatility took over, dragging share prices down.

The Dow Jones Industrial Average was down more than 300 points in early afternoon trading on Wall Street, having drifted as much as 400 points higher earlier in the session. The broader S&P 500 – which gauges the health of retirement and college savings accounts – was down 2 percent, while the Nasdaq Composite Index was down 1.5 percent.

All three major indexes have fallen into a deep hole opened by coronavirus fears that have knocked them roughly 30 percent off record highs hit just about a month ago.

The sense of gloom surrounding the outlook for the US and global economies deepened further on Friday after New York Governor Andrew Cuomo ordered all nonessential businesses to keep their workers home as cases of confirmed COVID-19 cases in the state topped 7,000 – the highest in the nation.

Normal economic activity in the US has come to a grinding halt as cities lock down and people stay indoors to contain the spread of COVID-19. Layoffs are surging as businesses scale back or temporarily shutter operations. State unemployment offices are reporting an unprecedented spike in initial jobless claims.

Spending – the engine of the US economy – is collapsing.

The speed and the severity of the slowdown are prompting ever more dire forecasts from analysts and economists as they scramble to revise their outlooks as the scale of coronavirus disruptions becomes clearer.

Researchers at Goldman Sachs led by chief US economist Jan Hatzius on Friday said they now expect year-over-year US economic growth to decline by a massive 24 percent in the second quarter.

“A decline of this magnitude would be nearly two-and-a-half times the size of the largest quarterly decline in the history of the modern GDP statistics,” Goldman wrote in a note to clients on Friday.

Goldman also sees the headline US unemployment rate increasing from 3.5 percent to 9 percent over the next couple of quarters. 

The US Federal Reserve has unleashed a slew of emergency measures over the past two weeks including lowering its benchmark interest rate to near zero and other crisis moves to unfreeze credit markets. Dollar funding markets have come under extreme stress as businesses around the world build US dollars war chests to weather the coronavirus storm. 

On Capitol Hill, the US Senate is debating a $1 trillion or more package of stimulus measures to help shore up the US economy and bring immediate relief to individuals, businesses and industries.