Dow closes down 900 points as virus fears bearhug investors

Friday’s selloff ends a three-day rally, as classic bear market hallmarks settle over markets.

The coronavirus pandemic - and the fiscal and monetary policies designed to ease the financial fallout from it - are reshaping the US and global economies in ways economists and investors are struggling to understand [File: Mike Segar/Reuters]
The coronavirus pandemic - and the fiscal and monetary policies designed to ease the financial fallout from it - are reshaping the US and global economies in ways economists and investors are struggling to understand [File: Mike Segar/Reuters]

The major United States stock indexes closed down on Friday, bringing an end to a three-day rally that saw the Dow Jones Industrial Average claw back into bull market territory, only to get bearhugged again by coronavirus fears and uncertainty. 

The 30-share index closed down 915.39 points or 4.06 percent to 21,636.78, ending the Dow’s biggest three-day winning streak since 1931. 

A brief rally in share prices following a dramatic plunge is known as a “dead cat bounce”, and is a typical feature of a bear market. 

The broader S&P 500 index, a proxy for US retirement and college savings accounts, gave back 3.37 percent while the Nasdaq Composite Index ended the session down 3.79 percent. 

Despite Friday’s losses, the three major indexes were all up on the week, with the Dow posting its biggest weekly gain since 1938 and the S&P mounting its biggest weekly advance since 2009. But to put that into perspective, the indexes are still more than 20 percent off their recent record highs. 

On Friday, US President Donald Trump signed into law a gargantuan $2 trillion coronavirus relief package to aid American industries, businesses and individuals struggling with the financial fallout from the pandemic.  

More than three million Americans filed initial jobless claims for the week ending March 21, data from the US Bureau of Labor Statistics (BLS) showed on Thursday, as coronavirus containment measures shut down entire sectors of the US economy, triggering a tsunami of layoffs.

The Federal Reserve has come to the economy’s rescue in recent weeks by mounting heroic efforts to unfreeze credit markets. The Fed has deployed measures developed during the 2008 financial crisis and innovated new ones to ease dollar shortages triggered by businesses hoarding cash to ride out the coronavirus storm.

But a lot of uncertainty lies ahead for the US and global economies, as captured in a note by Capital Economics Chief Economist Neil Shearing on Friday.

“An unprecedented injection of monetary and fiscal stimulus has eased the dollar squeeze that was threatening to implode the global financial system and – despite them giving back some gains today – supported a rebound in stock markets this week,” said Shearing.

“But the sheer scale and scope of the necessary policy response has rewritten the economic rule book in a way that will have profound effects long after the virus fades.”

Source : Al Jazeera

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