By The Washington Post · Taylor Telford, Thomas Heath
Wednesday brings the Dow's five-day losing streak to 2,390 points, erasing 8.15% off the blue-chip gauge. It's the biggest five-day percentage loss in two years.
"This is the pullback that everybody says was long overdue and that will shake out some of the weak hands," said Ivan Feinseth, chief investment officer at Tigress Financial Partners. "It's all coronavirus. Every time the market starts to rally, another case pops up."
New cases outside China exceeded those within its borders for the first time Wednesday, the World Health Organization reported. Investors are increasingly waking up to the potential fallout from an outbreak that has claimed nearly 3,000 lives, upended global supply chains, dramatically slowed travel and taken a bite out of corporate earnings. Oxford Economics says the virus could slow global growth to its lowest levels since the financial crisis.
Wall Street's demeanor darkened significantly Tuesday after officials from the Centers for Disease Control and Prevention warned that the virus would inevitably take a toll on the United States and asked businesses and local communities to prepare for its impact. The Dow on Tuesday endured its worst two-day slump in four years, with the index chalking up back-to-back 3% declines.
Wednesday saw an early rebound, with the Dow advancing more than 400 points before turning negative. The reversal came after Germany announced that it was on the brink of an epidemic and Bloomberg News reported that a Food and Drug Administration official said the virus was on the "cusp of a pandemic."
"Today's 652-point swing in the Dow shows that there are buyers out there, but more investors are waiting on the sidelines, looking for better bargains," said Howard Silverblatt of S&P Dow Jones Indices.
"No one knows for sure how much further this decline may have to run, but excesses have quickly been wrung out," said Sam Stovall of CFRA Research.
The Standard & Poor's 500 index on Wednesday dropped 12 points, to 3,116. The broad S&P has lost 7.97% in the past five sessions. That is also the biggest loss in two years. The tech-laden Nasdaq Composite broke a losing streak by finishing up 15 points to close at just over 8,980.
"The recent market carnage saw the S&P 500 futures fall 9% from the record high, and investors are nervous we could see further short-term weakness as history suggests outbreaks could take several months before the longer-term bullish trend reasserts itself," Ed Moya, an analyst with Oanda, wrote Wednesday. "Until the global spreading of the virus appears under control, we could see continued downward revisions to growth forecasts."
Overseas, investors shared Wall Street's jitters. Europe's benchmark Stoxx 600 index closed nearly flat, while Hong Kong's Hang Seng Index closed down 0.7%, and Japan's Nikkei 225 closed down nearly 0.8%.
Oil prices continued to fall, a reflection of the lower demand across the globe brought on in part by the coronavirus's shackling of Asian economies. The U.S. oil benchmark West Texas Intermediate sank deeper below the $50 per barrel "make or break threshold," trading at $48.71 late in the day. That's its lowest price in a year. Brent crude, the global benchmark, fell to $52.75 per barrel.
Bond yields skirted near all-time lows. The yield on the 10-year Treasury note rebounded slightly from Tuesday's all-time low. Yield drops as the price of a bond rises.
White House officials are playing down the threat posed by the outbreak. Larry Kudlow, President Donald Trump's chief economic adviser, said late Monday that investors should consider "buying these dips." On CNBC this week, Kudlow said he did not expect the Federal Reserve to react to the coronavirus and cut interest rates to juice the economy. He said there is "no supply disruption" appearing in the numbers that the White House is studying.
"We have contained this. We have contained this. I won't say airtight, but pretty close to airtight," Kudlow told CNBC in an interview Tuesday.
Publicly, Trump has said the coronavirus is "very well under control," but privately he has been furious about the stock market's slide, according to people familiar with the president's thinking who spoke on the condition of anonymity to share internal details. After the Dow's drop-off of more than 1,000 points Monday, Trump tweeted: "Stock Market starting to look very good to me."
The outbreak has hobbled China's powerful manufacturing sector, causing major supply-chain disruptions that have dampened revenue forecasts in a variety of industries. Retailers including Nike and Starbucks have closed stores in China, while Apple and Tesla have warned of the virus's impact on their profitability. As scores of airlines reduce service, air travel demand is slated to decline this year for the first time since the financial crisis, with the virus costing the airline industry $29.3 billion, the International Air Transport Association warned this week. China's idled factories and shut-in consumers have delivered a tough blow to the auto industry, which is expected to experience a 2.5% decline in 2020 global auto sales, according to a new report from Moody's.
"Negative psychological momentum continues to build," Wayne Wicker, the chief information officer at Vantagepoint Investment Advisers, wrote in commentary Wednesday. "While they have initiated reductions, analysts will continue to be taking earnings estimates lower to reflect ongoing disruptions in supply chains and manufacturing."