Dow closes below 20,000, wiping out nearly all the gains of Trump's presidency
Stocks nosedived on Wednesday following the fourth trading halt in two weeks, with Wall Street spooked by the deepening economic impact of the coronavirus pandemic. President Donald Trump earlier in the day announced that U.S. and Canada will block "non-essential traffic" from traveling across the northern border to control the disease's spread.
The Dow fell 1,335, or 6.3%, to close at 19,903. Earlier in the day, stocks tumbled more than 10%, triggering the market's "circuit breaker" that halts trading for 15 minutes. Trading is stopped when stocks decline by 7%, 13% or 20% in a single session. The broad-based S&P 500 fell 5.2%, while the tech-heavy Nasdaq slumped 4.7%.
"Markets were quick to give back Tuesday's gains, with equities returning to a sea of red," TD Securities analysts said.
Wednesday's slump wipes out roughly three years of stock market gains, with the Dow closing below 20,000 for the first time since 2017. On January 20, 2017, the day of President Donald Trump's inauguration, the index closed at 19,827. The S&P 500, which ended Thursday at 2,398, is just 227 points above its level when Mr. Trump formally took office.
The decline is noteworthy for its speed, with the losses mounting over the course of four weeks. The Dow had hit an all-time record on February 12, a little over a month ago, with the S&P and Nasdaq peaking a week later.
The widening pandemic, which has led to at least 109 deaths in the U.S., is prompting cities and states across the U.S. to order residents to stay home and to shut restaurants and bars and other gathering places. Those measures are spiraling through the economy, leading to layoffs and sharp declines in revenue for many consumer-focused businesses. The U.S. is likely already in a recession, according to Oxford Economics.
"We now see a severe global recession occurring in the first half of 2020," Deutsche Bank's economists wrote in a research note. "The quarterly declines in GDP growth we anticipate substantially exceed anything previously recorded going back to at least World War II."
The decline on Wednesday wipes out yesterday's market gains, which were fueled by President Donald Trump and Treasury Secretary Steve Mnuchin announcement that the administration and Congress were working on a "big" and "bold" legislative package to address the coronavirus crisis. Mnuchin added that the administration is "looking at sending checks to Americans immediately."
That bounce followed Monday's rout that marked Wall Street's worst day since the epic "Black Monday" crash in 1987.
"The global pandemic of COVID-19 has sent world equity markets into bear market territory," said Burt White, chief investment officer for LPL Financial, in an email. "The result is a cumulative 30% drop in the S&P 500 Index in just under 30 days."
While it's unclear how long the coronavirus pandemic will last, President Trump earlier this week said it could go on through July or August. In the short-term, economists say the damage could be deep, leading to job losses, a spike in unemployment and a decline in GDP.
"Attention is understandably focused on limiting the damage from the short-term effects of the coronavirus outbreak," Oxford Economics said in a Wednesday note. "But it's likely that, once disruption and uncertainty fade, the rebound in global economic activity will be strong. It's important for firms to position themselves for such a recovery."
