Wall Street trading halted temporarily as stocks tumble
NEW YORK — Fear bludgeoned financial markets around the world Monday, and stocks, bond yields and oil plunged on metastasizing worries about the effects of the new coronavirus.
The most violent drops came from the oil markets, where prices cratered more than 20%. But moves in stocks and bond yields were nearly as breathtaking.
In the United States, the S&P 500 plunged as much as 7.4% in the first few minutes of trading, and losses were so sharp that trading was temporarily halted.
Stocks trimmed their losses following the halt, and the index was down 5.5%, as of 10:25 a.m. Eastern time.
The Dow Jones Industrial Average lost 1,442 points, or 5.5% to 24,434 after briefly being down more than 2,000. The Nasdaq gave up 5.3%.
The carnage in the energy sector was particularly arresting. Occidental Petroleum, Marathon Oil, Apache Corp. and Diamondback Energy each sank more than 40%. Exxon Mobil and Chevron were on track for their worst days since 2008.
European stocks dropped more than 6%. Treasury yields careened to more record lows as investors dove into anything that seems safe, even if it pays closer to nothing each day.
Trading in Wall Street futures was halted for the first time since the 2016 U.S. presidential election after they fell more than the daily limit of 5%. Bond yields hit new lows as investors bought them up as safe havens.
The circuit breaker tripped in the U.S. stock market is meant to slow things down and give investors a chance to breathe before trading more.
The benchmark U.S. crude price was down over 20%, the biggest daily drop since the Gulf war in 1991 to hit their lowest levels since 2016. They were down as much as 30% earlier, deepening a rout that began when Saudi Arabia, Russia and other major producers failed to agree on cutting output to prop up prices. A breakdown in their cooperation suggested they will ramp up output just as demand is sliding.
Investors usually welcome lower energy costs for businesses and consumers. But it can also hurt producers, such as oil companies. The last time crude prices fell this low, in 2015, the U.S. saw a raft of bankruptcies by smaller energy companies.
Indexes in London and Frankfurt dropped by more than 7%. The benchmark for Italy, where the industrial and financial heartland was put in lockdown, fell 11%. Oil prices are down about 20%, deepening a rout that began when Saudi Arabia, Russia and other producers failed to agree on cutting output. Bond yields sank to new lows.
In Europe, London's FTSE 100 tumbled 6.6% to 6,034 after opening down by more than 8%. Frankfurt's DAX shed 6.9% to 10,743 and the CAC 40 in France lost 6.9% as well, to 4,793. Italy's FTSE MIB plunged 10% to 18,713.
On Wall Street, trading in futures for the Dow Jones Industrial Average and the S&P 500 was frozen after both fell by more than 5%, a daily limit. The last time they were frozen was just after U.S. President Donald Trump was elected in 2016.
Companies have been hit by travel and other controls that are spreading worldwide as the global number of coronavirus infections rose past 110,000 worldwide.
Tokyo's Nikkei 225 fell to 19,698.76 after the government reported the economy contracted 7% in the October-December quarter, worse than the original estimate of a 6.3% decline. That was before the viral outbreak slammed tourism and travel but after a sales tax hike dented consumers' appetite for spending.
Hong Kong's Hang Seng sank 4.2% to 25,047.42. The Shanghai Composite Index declined to 2,943.29.
The S&P-ASX 200 in Sydney retreated to 5,760.60. The Kospi in Seoul lost 4.2% to 1,954.77.
India's Sensex retreated 6.2% to 35,255.73. Markets in Taiwan, New Zealand and Southeast Asia also declined.
Benchmark U.S. crude fell 22%, or $9.21, to $32.07 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 22%, or $10.03, to $35.24 per barrel in London.
Those are the biggest percentage drops since January 1991, when the U.S. began air strikes on Iraq and unleashed strategic reserves to cope with the disruption to oil markets.
The International Energy Agency said in a report Monday that oil demand could fall this year for the first time since the global financial crisis in 2009.
“The oil price will stay low” in the $30s per barrel, IEA chief Fatih Birol said.
The dollar sank to 102.30 yen from Friday's 105.29 yen. Investors in Asia often buy up the Japanese currency and bonds in times of volatility. The euro advanced to $1.1416 from $1.1289.
Chinese factories that make the world's smartphones, toys and other consumer goods are gradually reopening but aren't expected to return to normal production until at least April. That weighs on demand for imports of components and raw materials from China's Asian neighbors.
Apple Inc. says slowdowns in manufacturing iPhones in China will hurt its sales totals. An airline industry group says carriers could lose as much as $113 billion in potential ticket sales.
Adding to pessimism, China reported Saturday that its exports fell 17% and imports were off 4% from a year earlier in January and February after Beijing shut factories, offices and shops in the most severe anti-disease measures ever imposed.
Central banks worldwide have cut interest rates. But economists warn that while that might help to encourage consumer and corporate spending, it cannot reopen factories that are due to quarantines or a lack of workers and raw materials.
Investors are looking ahead to a meeting Thursday of the European Central Bank, which is widely expected to announce new stimulus measures.
Already last week, global stocks were sinking as the spread of the virus prompted governments to follow China's lead by imposing travel controls and canceling public events.
The U.S. Federal Reserve's emergency 0.5% cut in its key lending rate failed to reverse the downturn and the yield on the 10-year Treasury, already at record lows, dipped under 0.40% from 0.7% late Friday. The 30-year yield fell below 1% for the first time ever.
The yield - the difference between a bond's market price and what investors will receive if they hold it to maturity - is an indicator of the market's outlook on the economy. Rising market prices that cause the yield to narrow indicate investors are shifting money into bonds as a safe haven.
“Global recession risks have risen,” Moody's Investors Service said in a report. “A sustained pullback in consumption, coupled with extended closures of businesses, would hurt earnings, drive layoffs and weigh on sentiment.”
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