Stocks drop again, capping their worst week since 2008

Wall Street
A Wall Street sign in front of the New York Stock Exchange.
(Associated Press)

Wall Street ended the week the same way it began: in full retreat from the coronavirus.

Stocks fell sharply and the price of oil sank Friday as federal and state governments moved to shut down bigger and bigger swaths of the nation’s economy in the hope of limiting the virus’ spread.

The Dow Jones industrial average slid more than 900 points, ending the week with a 17.3% loss. The index has declined in four of the last five weeks.

The latest sell-off wiped out the gains from a day earlier and capped the market’s worst week since the financial crisis of 2008.


Investors are worried that the coronavirus pandemic will plunge the U.S. and other major economies into deep recessions. Steps to contain the spread of the outbreak are causing massive disruptions and layoffs. Optimism that emergency actions by central banks and governments would ease the economic damage has waned as investors wait for the Trump administration to deliver on legislation that would pump billions of dollars into hurting households and industries.

At the same time, oil prices are being pulled lower by increased supplies at a time when demand is declining.

“This is kind of a double-whammy for the economy,” said Lindsey Bell, chief investment strategist at Ally Invest.

Friday’s selling accelerated after New York Gov. Andrew Cuomo ordered that most workers in his state stay home. The declaration came the day after California announced similar measures. The move leaves restaurants, retailers and other businesses dependent on consumer traffic in economic limbo as they’re forced to close doors and furlough or lay off workers.


The measures also mean less demand for oil. U.S. crude dropped about 21% and moved below $20 a barrel for the first time since February 2002.

Investors say they need to see the number of new infections stop accelerating for the market’s volatile skid to ease.

“We just don’t know what the next two weeks will bring,” said Paul Christopher, global market strategist at the Wells Fargo Investment Institute. “Are we going to follow the same infection curve as other countries and the number of infections will drastically accelerate? That’s when the storm is going to come.”

The virus has killed more than 10,000 people worldwide. More than 246,000 cases have been reported, including nearly 85,000 people who have recovered.


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.

The Dow fell 913.21 points, or 4.5%, to 19,173.98. The Standard & Poor’s 500 index, the benchmark for many index funds held in retirement accounts and the measure preferred by professional investors, fell 4.3%. It’s down 31.9% from the record high it reached a month ago.

Investors sought safety in U.S. government bonds, driving their yields broadly lower. The 10-year Treasury yield, which influences interest rates on mortgages and other consumer loans, slid to 0.88% from 1.12%. At least that’s normal markets behavior. Earlier in the week investors, were selling stocks and bonds at the same time in a desperate rush to raise cash.

Oil has been plunging in recent weeks as investors anticipate a sharp drop in demand for energy as manufacturing, travel and commerce grind nearly to a halt. It’s down from $45 a barrel earlier this month. A price war between Saudi Arabia and Russia has also pushed oil prices down.


European and Asian markets closed broadly higher.

Despite the latest bout of selling, hopes remain that there will be progress in finding virus treatments and that “a boatload of stimulus by both central banks and governments will put the global economy in position for a U-shaped recovery,” Edward Moya of Oanda said in a report.

On Capitol Hill, lawmakers continued to work to finalize a $1-trillion-plus aid package to prop up households and the U.S. economy that would put money directly into Americans’ pockets. President Trump has embraced the stimulus, believing it is needed to stabilize the economy and stock markets.

“We hope to see the Congress act on that early next week,” Vice President Mike Pence told reporters.


At the same briefing, Trump announced an effective closure of the U.S. border with Mexico, prohibiting most travel except for trade. That brings it in line with the restriction on the Canadian border earlier this week.

Shares of airlines, hotels and cruise line operators climbed as Congress worked on the economic stimulus bill, which would include billions of dollars to bail out those industries. United Airlines surged 15.1%. MGM Resorts International jumped 18.3%. Carnival rose 20%. The stocks are still down sharply for the year.

In just its latest move to backstop the markets, the U.S. Federal Reserve said Friday it would seek to hold down spiking interest rates in the state and municipal bond market by supporting banks’ purchase of the bonds.

Investors are jumpy due to uncertainty about the size and duration of the coronavirus outbreak and the spreading wave of business shutdowns meant to help contain it.


Markets are likely in for more turbulence next week as investors get a better look at the economic fallout from businesses closures and layoffs. Goldman Sachs Group analysts project that this week’s U.S. unemployment aid applications increased more than 2 million, a record.