Dow slides as the coronavirus tightens grip on economy and oil price war escalates

Dow Jones industrial average tumbled 700 points, or about 3%, at the open. Standard & Poor's 500 futures sank 2.8% and the Nasdaq fell 2.4%.

"The public's reaction to the virus literally has the potential to shut down the economy with travel interrupted and business meetings canceled," Chris Rupkey, chief financial economist at MUFG Union Bank, wrote in commentary Wednesday. "The wheels of the economy can't continue to turn as fast if the whole country avoids social interaction and tries to live online through the Internet. With less store traffic, merchants may have to actually cut prices instead of raising them. "

The markets rallied Tuesday after a day of big swings, with the Dow closing up more than 1,100 points on word that the White House was making progress on economic measures to help industries and workers hurt by the coronavirus, including plans to cut payroll taxes, relieve hourly workers and offer targeted help for the airline, cruise and hotel industries. The gains helped ease some of the pain from Monday's free-fall, which sent U.S. markets tumbling more than 7%. The sudden, sharp market drop triggered a halt to trading for 15 minutes.

Saudi Arabia on Wednesday announced its first oil production increase in a decade, with state oil giant Saudi Aramco moving to ramp up production to a record 13 million barrels per day, versus roughly 12 million barrels. The company did not give a timeline for the action but was responding to similar reports out of Russia Tuesday.

Oil prices, which had recovered somewhat after skidding 25% Monday, tumbled in response to the news. Brent crude, the global oil benchmark, sank more than 2.5% to about $36.30 per barrel in early trading.

The threat of oil wars exacerbated investor panic about the coronavirus, as confirmed U.S. cases surpassed 1,000 and deaths topped 31.

Government officials and businesses are taking sweeping actions to curtail community spread through social distancing. The uncertainty sent investors flocking to safe-havens: gold was up 0.3% in early trading, and the yield on the 10-year U.S. Treasury note declined 0.1%. Bond yields drop as prices increase.

"The bond market has yet to shrug off coronavirus fears while stocks are behaving much more erratically," Danielle DiMartino Booth, CEO and chief strategist at Quill Intelligence, told The Post in an email. "The fear factor won't dissipate until the public has better clarity on the extent of the virus' spread here in the United States." 

Washington state is prohibiting gatherings of more than 250 people in the Seattle area, one of the most drastic moves yet to contain the spread of the new coronavirus. Colleges across the country have canceled in-person classes, and some, including the Massachusetts Institute of Technology and the University of Dayton in Ohio, have ordered students to vacate dorms.

Officials in New York created a one-mile containment zone in New Rochelle, a suburb of New York City where the state's outbreak has been concentrated. Schools, places of worship and other large gathering spots inside the area will be closed for two weeks, as National Guard troops help with disinfection and food delivery.

"The lockdown of Italy and quarantining in New Rochelle, where I went to high school, are raising fears about a worldwide recession even though the news out of China and South Korea is improving," said Ed Yardeni, president of Yardeni Research.

European markets got a bump Wednesday after the Bank of England slashed interest rates to a record low of 0.25% to cushion England's economy from coronavirus fallout. The boost was well-received but short-lived, with Britain's FTSE 100 and Europe's benchmark Stoxx 600 giving up some gains to trade up about 0.8% by midday.

"A rate cut is unlikely to be enough on its own to stop the UK from experiencing a significant economic dent," said Russ Mould, investment director at AJ Bell, in commentary Wednesday. "Low borrowing rates won't necessarily get worried consumers spending again if they are cautious about going outdoors or are even forced to stay inside because of coronavirus-related issues." 

The Federal Reserve's first emergency rate cut since the financial crisis got a frosty reception from investors last week, and the White House is considering a variety of policy changes to blunt the coronavirus impact on American industries, including a payroll tax cut and paid sick leave. President Donald Trump is also considering federal assistance for oil and natural gas producers that have been hit by plummeting oil prices, The Post reported Tuesday.

Wall Street offered suggestions to the Federal Reserve and lawmakers for relief from the virus. PIMCO's U.S. economist Tiffany Wilding said in a blog post that Federal Reserve rate cuts "alone won't be the panacea" for cushioning the economic fallout from the coronavirus.

"A more useful policy response would be the revival of some of the Fed's crisis-era targeted lending operations," Wilding wrote. "Or if Congress, in addition to increasing funding for the health care sector, set up targeted programs to support businesses - especially small and midsized businesses - and consumers facing cash flow disruptions related to social distancing or quarantines."