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Stocks tumbled again Wednesday as Wall Street grappled with the Trump administration’s warning that the US has yet to face the worst of the coronavirus crisis.
The Dow Jones industrial average dropped 973.65 points, or 20,943.51 after the White House projected the deadly virus could kill as many as 240,000 people even if social-distancing protocols are followed.
The plummet came after the blue-chip index closed out its worst first quarter on record by dropping 410 points on Tuesday. The S&P 500 and Nasdaq also fell further Wednesday, with both dropping 4.4 percent, respectively.
“It’s the realization that things are not going to improve for a while,” said Donald Selkin, chief market strategist at Newbridge Securities. “Today’s market action certainly does not say that the bad news has all been discounted.”
The federal government’s grim predictions appeared to dampen last week’s rally on Wall Street, which was spurred by Congress passing a $2 trillion stimulus package to blunt the economic impact of the coronavirus pandemic.
In a sign that investors are once again growing worried, the CBOE Volatility Index — known as Wall Street’s fear gauge — was up 5.7 percent at 56.59 on Wednesday. The index hit an all-time closing high of 82.69 last month but had slid downward since.
President Trump’s warning that the nation is in for a “rough two weeks” signaled further uncertainty about how long the US economy will remain at a standstill to help stem the spread of the virus, experts said. His comments marked a stark shift in tone from last week, when he said he wanted to see the country “opened up and raring to go by Easter.”
“Investors have become used to the president’s optimistic, positive comments about when we get back to work, when this ends,” said Quincy Krosby, chief market strategist at Prudential Financial. “With the market yesterday was a much more sober assessment from the president.”
The market also got more gloomy signs on Wednesday of how hard the pandemic has hit the economy. Private payrolls shed 27,000 jobs in March, according to payroll processing firm ADP, the first drop since September 2017. And the Institute for Supply Management reported a contraction in US manufacturing activity last month.
“Social isolation, disease and death, economic contraction, enormous reliance on government action, and uncertainty about the long-term effects are all with us, and the main questions surround how far they will go,” Howard Marks, co-chairman of Oaktree Capital Management, wrote in a Wednesday note to clients.
Investors have anticipated such bad news and are now trying to gauge just how long the bleeding will last, partly by looking to Italy, Krosby said. The country imposed early lockdowns to contain the virus and has now hit a “plateau,” as an Italian health official put it Tuesday.
“They locked the country down. The question is when does this start working?” Krosby said. “We’re trying to come up with a model that you can then project more easily and with more clarity in a situation that is incredibly uncertain.”
With Reuters
