The word “pandemic” pummeled already fragile investor confidence on Wednesday, ending Wall Street’s 11-year bull run and driving down oil prices.
The Dow Jones Industrial Average closed down 1,464.94 points or 5.9 percent to 23,553.22, extending a three-week selloff to officially land the index in ‘bear market’ territory defined by a drop of 20 percent or more from recent highs.
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The S&P 500 – a proxy for retirement accounts and college savings plans – fell 4.89 percent, while the Nasdaq Composite Index finished down 4.7 percent. Both indexes narrowly escaped a bear market close.
The closing bell bloodbath reinforced a pre-market call by equity strategists at Goldman Sachs who said in a note to clients on Wednesday morning that the 11-year bull run in the S&P 500 “will soon end”.
“Both the real economy and the financial economy are exhibiting acute signs of stress,” Goldman analysts said, citing the global spread of coronavirus, and the collapse of crude oil prices this week.
Anxiety over the economic fallout from coronavirus deepened further on Wednesday after the World Health Organization declared the global outbreak a “pandemic”.
“We have called every day for countries to take urgent and aggressive action. We have rung the alarm bell loud and clear,” WHO chief Tedros Adhanom Ghebreyesus said on Wednesday.
But investors are now fretting over whether stimulus measures will be enough to offset the potential blow to the United States and global economies.
Opacity surrounding “major” economic stimulus measures promised by President Donald Trump this week continued to fuel uncertainty among businesses and investors.
US Treasury Secretary Steven Mnuchin told US lawmakers on Wednesday that the White House is looking at a slew of possible moves, including tax relief, loan guarantees, reimbursing workers for lost pay, and aiding small and medium-sized businesses. He also said the US Department of the Treasury will recommend that the April 15 deadline for filing US taxes be postponed for individuals and small businesses.
But in the absence of details explaining exactly how and when such measures would be rolled out, the clouds over Wall Street darkened, injecting more volatility into trading.
Shares of Boeing Co took a major beating, falling 18 percent on reports that the planemaker is freezing new hiring and overtime except in critical areas in order to preserve cash.
Energy stocks continued to come under pressure, with the oil price war triggered by Saudi Arabia over the weekend spelling trouble for the balance sheets of US fossil fuel firms.
On Wednesday, Saudi Arabia and fellow OPEC member the United Arab Emirates both announced plans to pump crude even more vigorously, starting next month.
The Saudi energy ministry directed state oil giant Aramco to raise its output capacity from 12 million barrels per day (bpd) to 13 million bpd, while the UAE’s state oil company ADNOC said it would raise its output to 4 million bpd in April and accelerate moves to ramp up to 5 million bpd.
Also on Wednesday, the US Energy Information Administration (EIA) said global oil demand is set to dive by 910,000 bpd in the first three months of this year, and cut its forecast for world oil demand this year by 660,000 a day. While the EIA still sees a slight uptick in demand for 2020, the Paris-based International Energy Agency said on Monday that it now believes annual oil demand this year will fall for the first time since the global financial crisis.
Global benchmark Brent crude settled down 4.41 percent at $35.58 a barrel, while US benchmark West Texas Intermediate crude slipped below $33 a barrel.