US stocks fell sharply enough Monday to halt trading for the third time in six sessions as the Federal Reserve’s latest interest-rate cut failed to quell Wall Street’s growing coronavirus fears.
The S&P 500 plunged as much as 11.4 percent to an intraday low of 2,401.57 after falling 8.1 percent at the opening bell, triggering a so-called circuit breaker that stopped trading for 15 minutes. The benchmark index pared the losses to trade about 8.9 percent lower as of 1:35 p.m.
The Dow Jones industrial average dropped as much as 2,798.52, or 12 percent, and was recently off 2,114.47 points, or 9.1 percent, at 21,071.15. The Nasdaq composite sank as much as 11.7 percent in early trading but was recently down 9 percent.
The selloff came after the Fed on Sunday slashed its benchmark interest rate to near zero and pledged to buy at least $700 billion in Treasury and mortgage-backed securities — moves that suggest the central bank is bracing for a recession as the coronavirus leads officials to ban large public gatherings and order restaurants and bars to close.
“There’s an increasing realization that the amount of quarantining that we’re going to be seeing will be much more widespread than probably anyone imagined even a month ago, and I think there’s the realization that it may be much longer than anyone expected,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
Drastic restrictions on business and daily life have raised concerns about layoffs, reduced consumer spending and slowed economic growth in the US. Goldman Sachs warned Sunday that the nation’s gross domestic product will not grow at all in the first three months of the year and contract by 5 percent in the second quarter amid the coronavirus crisis.
Investors are watching economic indicators such as unemployment claims and manufacturing surveys to gauge the pandemic’s economic impact while tracking the number of new coronavirus cases in the US, experts said.
One such survey released Monday showed signs of trouble ahead. The general business conditions index in the New York Fed’s monthly Empire State Manufacturing Survey plunged 34 points to -21.5, marking the largest point decline on record and the lowest level since 2009.
“Hard economic data that finally starts to hit the wires on March is going to throw any potential fence-sitters who are uncertain as to whether or not we’re going into a recession,” said Danielle DiMartino Booth, CEO and chief strategist of the research firm Quill Intelligence. “I think it’s going to give them all the evidence that they need.”
But it’s tough to fully size up the degree of the virus-related slowdown because certain data points such as GDP won’t capture the impact of the fast-moving crisis for weeks, according to Chris Rupkey, chief financial economist at MUFG Union Bank.
“This is almost unprecedented,” Rupkey said. “It’s not like any recession we’ve seen because the economic data looked perfect at the moment.”
Monday’s selloff started what’s likely to be another week of volatile trading in the stock markets. The Dow posted its biggest-ever point gain on Friday, but not before falling 20 percent from its recent high into bear-market territory in a week that saw trading halted twice.
Sunday marked the Fed’s second emergency rate cut this month aimed at blunting the economic effects of the coronavirus pandemic. But Wall Street is still waiting for a fiscal stimulus package to get through Congress now that President Trump has declared a national emergency to enable the federal government to combat the outbreak.
The House of Representatives and the White House reached a deal Friday for a bill that includes free coronavirus testing and funding for paid sick leave. But it awaits a vote in the Senate — and experts say Wall Street will be looking for a more aggressive response as the virus crisis unfolds.
“While the package they provided on Friday was a step in the right direction, it was a baby step with regard to the amount of economic damage being caused,” said Andrew Smith, chief investment officer at Delos Capital Advisors.
