NEW YORK (AP) — Stocks are sinking sharply again Wednesday, nearly wiping out a huge rally from a day earlier as Wall Street continues to reel from worries about the coronavirus.
Another big central bank made an emergency cut to interest rates in hopes of blunting the economic pain caused by COVID-19, which economists call the global economy’s biggest threat. But investors are still waiting for details promised earlier by President Donald Trump on potential aid for the economy through tax breaks and other relief.
Stocks fell from the opening of trading in New York, including a 3.7% loss for the S&P 500. The losses deepened as the day progressed, and the Dow Jones Industrial Average was down more than 1,000 points.
“The government probably should have been thinking about stimulus last month,” said Kristina Hooper, Invesco’s chief global market strategist. “Every day that passes makes the economic impact of coronavirus that much worse.”
Many investors are worried that a divided Congress will have trouble agreeing to any plan, she said.
The speed of the market’s declines and the degree of its swings the last few weeks have been breathtaking. It was only three weeks ago that the S&P 500 set a record high. Since then, it’s lost roughly 18%, and the Dow Jones Industrial Average has had six days where it swung by 1,000 points, not including Wednesday. The Dow has done that only three other times in history.
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus, but the fear is that COVID-19 could drag the global economy into a recession by hitting it from two ends.
On the supply side, the worst-case scenario has companies with less things to sell as factories shut down and arenas dim the lights because workers are out on quarantine. On the demand side, companies see fewer customers because people are huddling at home instead of taking trips or going to restaurants.
That’s why many analysts say markets will continue to swing sharply until the number of new infections stops accelerating. In the United States, the number of cases has topped 1,000. Worldwide, more than 119,000 people have been infected, and over 4,200 have died.
Neither lower interest rates nor stimulus plans by governments will stop this crisis and worries about its effect on the economy. Only the containment of the virus can do that. But they can provide support to the economy in the meantime, and investors fear things would be much worse without them.
The Bank of England’s emergency rate cut on Wednesday follows an earlier one by the Federal Reserve, and economists expect the European Central Bank to be the next to act. It has a meeting Thursday on monetary policy. Investors are still worried that the government’s fiscal stimulus packages may not be able to mitigate the impact on the economy.Louis Wong, Philip Capital Management
Italy’s government announced $28 billion in financial support for health care, the labor market and families and businesses that face a cash crunch due to the country’s nationwide lock down on travel.
Australia announced a $1.6 billion virus-fighting package and reportedly plans an additional $6.5 billion in economic stimulus. Japan and Thailand also have announced fresh help for businesses and workers.
