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Stocks Plunge Up To 9%, Triggering Trading Halt, As Coronavirus Causes Unprecedented Volatility On Wall Street

(Updated 2:35 p.m. EST, March 18, 2020)

Topline: The stock market fell again on Wednesday—with the S&P 500 losing 8.4%, triggering a “circuit breaker” trading halt, and the Dow down almost 10%—more than erasing the previous session’s gains as investors grappled with ongoing coronavirus fears and awaited more details on the government’s $1 trillion economic response to the pandemic.

  • By mid-afternoon, the Dow Jones industrial average had fallen over 2,000 points—around 9.8%, while the S&P 500 and Nasdaq were down 8.4% and 7.3%, respectively. Stocks pared back some of their losses later in the day.
  • Stock futures once again indicated steep losses prior to the market’s open, with all three major indexes hitting their limit-down levels of 5% or lower in premarket trading. 
  • That marks the third day in a row that overnight futures have hit either limit-down or limit-up levels, indicating the high level of uncertainty among investors right now. The CBOE Volatility Index, which gauges fear on Wall Street, currently sits at 70.15—after posting its highest-ever close of 82.69 on Monday (the previous peak was 80.74, during the 2008 financial crisis).
  • “The market’s volatility right now is truly unprecedented throughout history,” according to Bespoke Investment Group. Data from the firm shows that yesterday’s rally was the seventh straight day where the S&P 500 swung more than 4% in either direction, which has never happened before—and that trend looks like it will continue.
  • Wall Street continues to await more news on the Trump administration’s massive fiscal stimulus package, which could exceed $1 trillion and includes measures like direct payments to Americans in need, loans to small businesses and financial relief to airlines and other affected industries.
  • While urging Republican senators to act on the economic stimulus measures, Treasury Secretary Steven Mnuchin warned on Tuesday that the coronavirus pandemic, if not properly dealt with, could result in 20% unemployment in the U.S.—double the rate that it was during the 2008 financial crisis and the highest since the 1929 Great Depression.

Crucial statistic: Confirmed cases of coronavirus have now surpassed 200,000 worldwide, more than doubling in the last two weeks, according to data from Johns Hopkins University. The total number of deaths has reached 8,000 globally. In the U.S. alone, cases have now been confirmed in all 50 states, with almost 6,500 infected and at least 114 deaths.

Crucial quote: “Conditions remain dire, but we do have to stress the recent moves by the Fed should help to stabilize the credit markets and stem an even bigger disaster,” according to a recent note from Bespoke. 

Tangent: Many famous investors are now sounding the alarm, too. According to billionaire investor Jeffrey Gundlach, CEO of DoubleLine Capital, the odds of a recession are at 90% and it is “ludicrous” to think otherwise. “When you decimate the restaurant industry, the travel industry, the hotel industry, the airline industry, the cruise line industry, obviously you’re going to take a huge divot out of economic activity,” he said on a webcast call Tuesday, while also adding that the Trump administration’s fiscal stimulus package will likely amount to more than $1 trillion. Similarly, billionaire investor Bill Ackman, head of Pershing Square Capital Management, said in a tweet on Wednesday that the only answer to dealing with the current crisis is to “shut down the country for the next 30 days and close borders.” He urged President Trump to “keep only essential services open” and have the government pay wages to affected Americans until we reopen. Gundlach has a net worth of $2.1 billion, while Ackman is worth $1.4 billion, according to Forbes’ estimates.

Key background: Markets rebounded on Tuesday amid news that the Trump administration is making progress on plans for a massive fiscal stimulus package that could exceed $1 trillion in an effort to reinvigorate the U.S. economy. The Dow rose 5.2%, over 1,000 points, on Tuesday, the S&P 500 nearly 6% and the Nasdaq Composite 6.2%. That rally followed one of the stock market’s worst days in history, however. On Monday, stocks plummeted after Trump said that the negative impact from coronavirus could last until August and that the U.S. “may be” heading for a recession (a statement that many experts agree with). The Dow plunged 12.9%—nearly 3,000 points, while the S&P was down 12% and the Nasdaq 12.3%. Monday’s drop was one of the largest on record in terms of points lost—for the Dow, it was worse than the ‘Black Thursday’ sell-off of 10% last week, and the worst since the 1987 ‘Black Monday’ market crash. It was also the Nasdaq’s biggest one-day loss in history. The major benchmark indexes are down around 30% from their record highs almost a month ago, now well into bear market territory.

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