Stocks fall, capping Wall Street’s worst quarter since 2008
NEW YORK (AP) — Stocks fell Tuesday to close out Wall Street’s worst
quarter since the most harrowing days of the 2008 financial crisis.
The
S&P 500 dropped a final 1.6%, bringing its loss for the first three
months of the year to 20% as predictions for the looming recession
caused by the coronavirus outbreak got even more dire. Stocks haven’t
had this bad a quarter since the last time economists were talking about
the worst downturn since the Great Depression, when the S&P 500
lost 22.6% at the end of 2008.
The surge of coronavirus cases
around the world has sent markets to breathtaking drops since
mid-February, undercutting what had been a good start to the year.
Markets rose early in the quarter, and the S&P 500 set a record with
expectations that the economy was accelerating due to calming trade
wars and low interest rates around the world.
But benchmark U.S.
crude oil dropped by roughly two thirds this quarter on expectations
that a weakened economy will need less fuel. The yield on the 10-year
Treasury dropped below 1% for the first time as investors scrambled for
safety, and it ended the quarter at roughly 0.67%. Germany’s DAX lost a
quarter of its value, and South Korean stocks fell just over 20%.
The big question is if markets will get worse. At this point, no one knows.
“People
are trying to digest the length and magnitude of what the coronavirus
impact is going to be,” said George Rusnak, managing director of
investment strategy at Wells Fargo Private Bank.
The steep drops
from Tokyo to Toronto in recent weeks reflect investors’ understanding
that the economy and corporate profits are in for a sudden, debilitating
drop-off. Economies around the world are grinding to near standstills
as businesses close their doors and people hunker down at home in hopes
of slowing the spread of the virus.
But markets have also cut
their losses in recent weeks on hopes that massive aid from governments
and central banks around the world can blunt the blow. The S&P 500
was down nearly 31% for the quarter at one point, but it has climbed
15.5% since last Monday.
The Fed has promised to buy as many
Treasurys as it takes to get lending markets working smoothly after
trading got snarled in markets that help companies borrow short-term
cash to make payroll, homebuyers get mortgages and local governments to
build infrastructure. Congress, meanwhile, approved a $2.2 trillion
rescue plan for the economy, and leaders are already discussing the
possibility of another round of aid.
Whether markets have indeed
found a bottom or whether investors have become too optimistic about the
economic rebound coming after the viral outbreak peaks is impossible to
say without knowing when the number of new infections will hit its
peak.
“We’re kind of on this little milestone journey with
markets,” said Brent Schutte, chief investment strategist at
Northwestern Mutual Wealth Management Co. “First, we get the economic
plan in place, then we have to start to see some of the containment
actions pay off. At some point it’s going to be how do we get back to
work.”
Among the next milestones for investors is Friday’s jobs
report, which is expected to show a sharp drop in payrolls. Companies
will also being reporting their earnings results for the first quarter
in upcoming weeks, and analysts are looking for the steepest drop in
profits since the start of 2016, according to FactSet.
The numbers may get even worse in the following quarter.
Goldman
Sachs economists said Tuesday they expect the U.S. economy to shrink
34% in the second quarter, but they expect growth to rebound in the
third quarter.
The S&P 500 fell 42.06 points to 2,584.59. The
Dow Jones Industrial Average lost 410.32, or 1.8%, to 21,917.16, and
the Nasdaq was off 74.05, or 1%, to 7,700.10.
The relatively
modest moves are a big departure from earlier in the month, when huge
swings punished investors. The S&P 500 had its worst day since Black
Monday 1987 on March 12 with a 9.5% loss, for example, only to outdo
itself with a 12% drop two trading days later. Sandwiched in between was
a 9.3% surge.
The number of known coronavirus cases keeps
rising, and the worldwide tally has topped 830,000, according to Johns
Hopkins University. The United States has the highest number in the
world, more than 170,000.
Most people who contract COVID-19 have
mild or moderate symptoms, which can include fever and cough. But for
others, especially older adults and people with existing health
problems, the virus can cause pneumonia and require hospitalization.
More than 41,000 have died worldwide due to COVID-19, while more than
175,000 have recovered.
We’re still not even close to peak
coronavirus in the U.S. which has already reported more cases than any
other country and will sadly likely see a huge spike in the number of
deaths, meaning further lockdown measures will likely follow,” said
Craig Erlam, senior market analyst at OANDA Europe. “Huge challenges
still lie ahead.”
AP Business Writer Pan Pylas contributed from London.