U.S. stocks plunged more than 7.5 per cent in the worst day on Wall Street since the financial crisis, as a full-blown oil price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, crude sank 20 per cent and credit markets buckled.
The S&P 500 sank the most since December 2008 and is now at a nine-month low. The rout began at the open, with losses reaching 7 per cent four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes. The markets will close if losses reach 20 per cent. The measure is down almost 19 per cent from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day.
In a dramatic day across assets globally:
- All but nine S&P 500 companies were lower Monday, with energy producers routed by 20 per cent. Exxon Mobil and Chevron were down more than 12 per cent. Banks lost 11 per cent, with an ETF that tracks regional banks had for its worst day since 2009. Apple sank 7.9 per cent and Dow Chemical plunged 22 per cent.
- Crude tumbled the most since the Gulf War in 1991, after an OPEC+ alliance that had contained global production disintegrated. WTI and Brent pared some of their losses but remained down more than 20 per cent.
- The 10-year Treasury yield fell below 0.5 per cent and the 30-year yield dropped under 0.9 per cent, taking the whole U.S. yield curve below 1 per cent for the first time in history.
- The Stoxx Europe 600 Index fell the most since 2016 on trading volumes exceeding three times the 100-day average. Several of the region’s gauges look set to enter bear markets. Japanese stocks entered one earlier when they tumbled almost 6 per cent.
- A U.S. derivatives index that measures the perceived risk of corporate credit surged by the most since Lehman Brothers collapsed.
- Exchange rates including the yen saw sharp moves as traders struggled to establish where new ranges might be. The yen was up about 3 per cent versus the dollar while the euro and Swiss franc both strengthened more than 1 per cent.
The oil-price crash threatened to upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home. Investors are clamoring for some policy response from the Trump administration, which has so far signaled that it believes the spread is under control.
“The market was poised and vulnerable to this volatility and crude oil has just exacerbated it,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. “The coronavirus itself has been the main cause of the correction, but now it’s being exaggerated even further.”
President Donald Trump and his economic team will weigh measures later Monday to contain the fallout from coronavirus and a sudden crash in oil prices, with funding for a temporary expansion of paid sick leave and aid for battered U.S. energy producers among possible steps. A Bloomberg gauge of financial stress for the U.S. has deteriorated at the fastest pace since the great financial crisis.
“When there’s panic, there tends not to be accurate pricing of assets,” Kristina Hooper, Invesco’s chief global market strategist, said in an interview at Bloomberg’s New York headquarters. “The sell-off today to me is emblematic of that. It really is a knee-jerk reaction to what’s happened over the weekend.”
Here are some key events coming up:
The European Central Bank’s policy decision comes Thursday amid expectations it may ease policy.
The U.K. Chancellor of the Exchequer unveils the government’s 2020 budget on Wednesday.
The U.S. core consumer price index, due Wednesday, is expected to remain subdued in February.
These are the main moves in markets:
The S&P 500 Index sank 7.6 per cent to 2,745.92 as of 4 p.m. New York time, the lowest sicne June.
The Dow Jones Industrial Average sank 7.7 per cent.
The Nasdaq Composite Index sank 6.8 per cent.
The MSCI All-Country World Index sank 5.6 per cent to 485.98, the lowest in more than 13 months on the biggest tumble in more than 11 years.
The Bloomberg Dollar Spot Index decreased 0.3 per cent.
The euro surged 1.6 per cent to US$1.1464, the strongest in more than 13 months on the biggest jump in almost four years.
The Japanese yen appreciated 3.2 per cent to 102.13 per dollar, the strongest in more than three years on the largest surge in almost four years.
The British pound gained 0.6 per cent to US$1.3125, reaching the strongest in more than five weeks on its fifth consecutive advance.
The yield on 10-year Treasuries sank 21 basis points to 0.55 per cent, the lowest on record with the largest tumble in more than eight years.
The yield on 30-year Treasuries fell 31 basis points to 0.98 per cent, the lowest on record with the biggest fall on record.
Germany’s 10-year yield decreased 15 basis points to -0.856 per cent, hitting the lowest on record with its eighth straight decline.
Britain’s 10-year yield dipped seven basis points to 0.159 per cent, reaching the lowest on record with its 15th straight decline.
Gold futures rose 0.2 per cent to US$1,676.60 an ounce.
West Texas Intermediate crude fell 25 per cent to US$30.96 a barrel, the most since 1991.