By The Washington Post · Thomas Heath, Rachel Siegel · BUSINESS, US-GLOBAL-MARKETS
The Dow Jones industrial average plunged 1,000 points in the morning, swinging widely throughout the session. It closed down 357 points, or 1.4 percent. The Standard & Poor's 500 index shed 0.8 percent while the Nasdaq rallied to end flat.
The 10-year Treasury yield, a key marker in global finance, also hit a record low Friday, a sign that investors are fleeing equities for the safety of bonds. The Cboe Volatility Index, known as the VIX, surged to its highest level since the Great Recession, signalling to investors that more volatility is ahead.
Friday's finish capped a blistering week on Wall Street. All three major U.S. indexes finished in correction, which signals a 10 percent reversal from recent highs and heightens investor worries of a runaway slide. The Dow and the S&P 500 had their worst weeks since the financial crisis, according to S&P Dow Jones indices.
The Dow plunged 12 percent for the week. with American Express and Boeing among the biggest losers, shedding 20 percent and 17 percent, respectively. The S&P 500 lost 11.5 percent over the five days, while Nasdaq fell 10 percent.
All 11 S&P 500 stock market sectors are in a correction, which means that equity investors have no place to hide from the carnage. Energy and technology were among the worst hit.
Since Feb. 19, U.S. stocks have lost nearly $3.6 trillion in value.
As stocks nose-dived this week, calls have grown from prominent investors for the Federal Reserve to cut interest rates, a move that usually calms markets. Wall Street traders are now betting on at least three rate cuts this year, including one rate reduction when the Fed meets next on March 18. Interest rates are currently just below 1.75 percent, a low level by historical standards, but higher than the rates in many other parts of the world.
Fed Chair Jerome Powell gave no hints about a possible rate cut but said the Fed would take action if the economy takes a hit from the coronavirus.
"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity," Powell said. "The Fed is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."
Some investors were glad to see the end of February after the stomach-churning slides of the past several days.
"Investors had a love-hate relationship with risk in the month of February," said Kristina Hooper, chief market strategist at Invesco. "The first several weeks of the month saw investors embracing stocks. Then as worries grew about the coronavirus outbreak, market participants spent the past six trading days in panic mode. I suspect it will take reassurances from the Fed to stabilize markets."
Global markets also took a beating. In Japan, the Nikkei tumbled 3.7 percent as officials declared a state of emergency in the northern island of Hokkaido and doubts were cast about this summer's Tokyo Olympics. Hong Kong's Hang Seng dived 2.5 percent, and the Shanghai composite skidded 3.7 percent.
European markets were in the same boat, into correction for the week.
The travel sector was slammed: British Airways owner IAG tumbled more than 9 percent after it said it would cancel some flights to coronavirus-hit countries such as Italy and South Korea.
Oil prices took a dive as the global futures market broke below $50 per barrel, a closely watched number that signals whether oil companies and oil producing countries can make profits. West Texas Intermediate, the U.S. oil gauge, was selling below $45 per barrel. Brent Crude prices were just under $50. The energy sector was down 20 percent on the week and nearly 25 percent on the year. "Energy is the main killer," said Howard Silverblatt of S&P Dow Jones indices. "It's devastating."
Oil suppliers are hoping for a boost in demand from possible supply cuts at a March 5-6 meeting by the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, a group known as OPEC+.
Experts said the panic caused by the coronavirus needs to play itself out. There are many unknowns, they said.
"The lights went out on the stock market in February," said Chris Rupkey of MUFG Bank. "Wall Street can panic, but until main street panics, we are not going to get a recession. If the broader economy doesn't take a hit, companies don't lay off people and consumers don't stop buying homes and cars, then this sell-off is too far ahead of itself."
The outbreak has upended daily routines and business operations around the world. Next week's Geneva Motor Show, a major event for the world's struggling auto industry, was canceled as Swiss officials said gatherings of more than 1,000 people had been banned through mid-March. The Port of Baltimore reduced its hours of operation after port officials said the coronavirus' posed "significant and unprecedented" disruptions to the global supply chain.
"If the virus spreads quite a bit, the market will work through a bad quarter or two of bad economic activity," said Scott Wren of Wells Fargo Investment Institute. "It's all about whether people are going to be out there spending or if they are going to be home hiding."
This week's swift Wall Street sell-off erased one-third of stocks' gains since President Donald Trump's 2016 election. And while public health officials scramble to contain what appears to be inevitable spread in the United States, the government finds itself battling an economic emergency that could threaten the nation's record economic expansion.
Jared Bernstein, a senior fellow at the left-leaning Center On Budget and Policy Priorities, said the stock market's decline was not a concern for a big chunk of the population.
"Such a sharp market correction is, of course, a big deal," Bernstein said. "For the half of households who don't own stocks, what matters much more is the economic impact of the virus on their jobs and incomes. There are millions of workers who don't get paid if they can't go to work."