Stocks went on a wild ride Thursday as investors struggle to gauge the potential impact of the coronavirus outbreak on the global economy.
The Dow Jones Industrial Average dropped 960 points in morning trading, then erased much of the loss by midday before giving way to another round of selling in the afternoon. It was down more than 780 points, or 2.9%, in afternoon trading.
The bond market saw similar volatility, with the yield on the 10-year
"People can demand things that feel safe for irrational amounts of time," said
The losses extended a weeklong rout in stocks that has wiped out the solid gains the major indexes had posted early this year. Investors came into 2020 feeling confident that the
The furious selling of the past week has brought the S&P 500 10% below the record high it set just a week ago. If the S&P closes that low it would mark what market watchers call a “correction,” a normal phenomenon that analysts have said was long overdue in this bull market, which is the longest in history.
“This is a market that’s being driven completely by fear,” said
Stokes said the swoon reminded her of the market’s reaction following the
“Eventually we’re going to get to a place where this fear, it’s something that we get used to living with, the same way we got used to living with the threat of living with terrorism,” she said. “But right now, people don’t know how or when we’re going to get there, and what people do in that situation is to retrench."
The S&P 500 was down 2.8% as of
The virus has now infected more than 82,000 people globally and is worrying governments with its rapid spread beyond the epicenter of
At their heart, stock prices rise and fall with the profits that companies make. And Wall Street’s expectations for profit growth are sliding away. Apple and
Goldman Sachs on Thursday said earnings for companies in the S&P 500 index might not grow at all this year, after predicting earlier that they would grow 5.5%. Strategist
Besides a sharply weaker Chinese economy in the first quarter of this year, he sees lower demand for
Such cuts are even more impactful now because stocks are already trading at high levels relative to their earnings, raising the risk. Before the virus worries exploded, investors had been pushing stocks higher on expectations that strong profit growth was set to resume for companies.
The S&P 500 was recently trading at its most expensive level, relative to its expected earnings per share, since the dot-com bubble was deflating in 2002, according to FactSet. If profit growth doesn’t ramp up this year, that makes a highly priced stock market even more vulnerable.
Goldman Sach’s Kostin said the S&P 500 could fall to 2,900 in the near term, which would be a nearly 7% drop from Wednesday’s close, before rebounding to 3,400 by the end of the year.
Traders are growing increasingly certain that the
A handful of companies have managed to gain ground in the latest rout of stocks. Medical teleconferencing company
The market's sharp drop this week partly reflects increasing fears among many economists that the
Earlier assumptions that the impact would largely be contained in
"A global recession is likely if COVID-19 becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in
The market rout will also likely weaken Americans' confidence in the economy, analysts say, even among those who don't own shares. Such volatility can worry people about their own companies and job security. In addition, Americans that do own stocks feel less wealthy. Both of those trends can combine to discourage consumer spending and slow growth.
AP Business Writer