Wall Street had a grisly start to the week, with the Dow Jones Industrial Average sliding by 3,000 points, or 13 percent, to end the day at 20,188, a few hundred points above where it was when President Donald Trump took office.
The S&P 500 and Nasdaq closed the day with a decline of around 12 percent each.
The Dow closed at 19,732 on Jan. 19, 2017, the day before Trump was sworn in.
Monday’s massive sell-off came despite emergency action from the Federal Reserve over the weekend to shore up the economy by infusing markets and Main Street with easier access to cash. But as the market absorbed the very modest effects of the Fed’s action, traders remained unconvinced that even such unprecedented measures will offset the financial blow.
The seriousness of the situation implied by the Fed’s response triggered global selloffs in stocks, oil futures and even gold, which is usually seen as a “safe haven” investment when stocks tumble.
While Treasury Secretary Steven Mnuchin said Sunday he did not see any imminent recession due to the coronavirus pandemic, Trump said Monday the economy ‘may be’ heading into a recession, but was hopeful the economy would strongly rebound. “If we do a really good job, we’ll not only hold the death down to a level that is much lower than the other way, had we not done a good job, but people are talking about July, August, something like that,” Trump told reporters during a White House briefing Monday afternoon.
The chaos came just over 12 hours after the Fed unleashed a series of crisis response measures, slashing rates to almost zero Sunday night, injecting cash into Treasurys, and announcing coordinated efforts with central banks across the world to ensure liquidity as the coronavirus pandemic takes a hold on the global economy.
“Reducing interest rates to borrowers will ease the burden of existing debts slightly but is unlikely to spur the usual surge of borrowing as consumers and businesses batten down the hatches for a coming drop off in U.S. economic activity,” Greg McBride, chief financial analyst at Bankrate.com, said.
“The central banks threw the kitchen sink at it yesterday evening, yet here we are,” Societe Generale strategist Kit Juckes told Reuters. “There is a great sense that central banks are going to get to grips with the issues of getting money flowing … But the human problem, the macro problem, there is nothing they can do about that.”
The week’s trading halted before it even started, with the S&P 500 triggering a “limit down” threshold in premarket activity. Within seconds of the opening bell, the S&P 500 fell again, by 7 percent, triggering a circuit breaker that halted all trading on the exchange floor for 15 minutes.
Monday’s trading halt marks the third time since the coronavirus outbreak that U.S. markets have paused activity. If the S&P falls by 13 percent after its first halt, the circuit breaker will be triggered again. A drop of 20 percent would halt trading for the rest of the day.
Manufacturing data released from China over the weekend were a troubling indication of what could happen in the U.S., with retail sales down by 20.5 percent and industrial output down by 13.5 percent.