Wall Street’s record-breaking 11-year “bull market” came to an end on Wednesday as fears about the spreading Covid-19 pandemic hit stock markets again.
US stock markets have been on an unprecedented streak since 2009, a bull market of gains. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction” by governments in corralling the virus.
The Dow Jones Industrial Average closed down over 1,400 points, 5.8%. After days of wild fluctuations, the Dow has now fallen 20% from its most recent highs – finally signaling a bear market. The S&P 500 also fell and is now 19% below its recent high.
The fall came as Donald Trump met with Wall Street’s most senior executives at the White House. It was the latest in a series of meetings the Trump administration has held as it works on a strategy to shore up the US economy.
Trump said: “Prior to the coronavirus it was all go. The numbers were fantastic. Now we are hitting a patch. We are going to do something about getting rid of this virus as quickly as possible.
“I think there will be a pent-up demand when this is gone,” he said.
Trump declined to answer questions about whether or not he was considering a bailout of various troubled industries including the airlines and shale oil companies but said he would be announcing plans soon. “We are having to fix a problem that four weeks ago nobody thought would be a problem,” he said.
The banking executives present stressed that the US financial system was robust. “This is not a financial crisis,” said Brian Moynihan, chief executive of Bank of America.
Economists predict more falls to come. Mark Zandi, chief economist at Moody’s, predicted more sell-offs. “I can’t see people buying when the tornado is still in the backyard,” he said. Zandi now thinks a US recession is more likely than not.
The Federal Reserve meets next week and is expected to cut interest rates for the second time this month in order to encourage spending and investment. But that news has not been enough to reassure investors.
The Bank of England cut interest rates on Wednesday as an emergency measure but in London the FTSE 100 closed down again as did all the major European stock markets.
Concerns about how the White House is handling the crisis and a political impasse in Washington are fueling investor concerns. Many investors are worried that a divided Congress will have trouble agreeing to any plan, said Kristina Hooper, Invesco’s chief global market strategist.
Besides worries about the virus and the government’s ability to get something done for the economy, the market was also weighed down by a continued decline in oil prices, said Patrick Schaffer, global investment specialist at JP Morgan Private Bank.
“I want all retail investors to expect this environment will continue: sharp down days, sharp up days,” he said. “This feeling of whiplash that people feel probably continues for some period of time.”
The speed of the market’s declines and the degree of its swings the last few weeks have been breathtaking. It was only three weeks ago that the S&P 500 set a record high.
The Dow Jones Industrial Average has had six days in the last few weeks where it swung up or down by 1,000 points or more, not including Wednesday. The Dow has done that only three other times in history.
AP contributed to this story
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