Stocks, oil sink again as recession fears batter markets
NEW YORK (AP) — The vicious swings keep coming for the stock market, and the S&P 500 sank more than 5% in early trading Wednesday to erase most of the prior’s day respite.
Markets have been incredibly volatile for weeks as Wall Street and the White House acknowledge an increasing risk of a recession due to the coronavirus outbreak. The typical day this month has seen the stock market swing by 4.9%. Over the last decade, the typical move was just 0.4%.
The selling pressure swept markets around the world. Benchmark U.S. oil fell more than 10% and dropped below $24 per barrel for the first time since 2002.
European stock indexes lost 5% following broad losses in Asia. Even prices for longer-term U.S. Treasurys, which are seen as some of the safest possible investments, fell as investors flocked to the very shortest-term Treasury debt.
It was just a day ago that the S&P 500 surged 6% after President Donald Trump he’s “going big” in plans to aid an economy that’s increasingly shutting down by the day. The program could approach $1 trillion, and it would follow a spate of emergency actions by the Federal Reserve and other central banks to get financial markets running more smoothly.
Despite all that, investors are struggling with how much to pay for anything — stocks, bonds, oil — when it’s so uncertain how badly the economy is getting hit, how much profit companies will make and how many companies may go into bankruptcy due to a cash crunch.
“These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,” Deutsche Bank economists wrote in a report Wednesday.
With all the uncertainty and early evidence that China’s economy was hit much harder by the virus than earlier thought, they now see “a severe global recession occurring in the first half of 2020.”
But they also are still forecasting a relatively quick rebound, with activity beginning to bounce back in the second half of this year in part because of all the aid promised from central banks and governments.
Investors say they need to see the number of infections slow before markets can find a bottom, analysts said. The number of new cases reported in China, where the virus emerged in December, is declining but infections in the United States, Europe and elsewhere are increasing.
The number of infections has topped 200,000 worldwide, and the virus has killed more than 8,000.
For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks.
Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems, and recovery could take six weeks in such cases.