Dow falls 6.3% in latest US stocks rout, all but erases 'Trump-bump'

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Traders watch stock prices at the opening bell of the New York Stock Exchange on 18 March 2020. PHOTO: EPA-EFE

NEW YORK (REUTERS, AFP) - Wall Street stocks plunged again on Wednesday (March 18) as the economic toll from the coronavirus mounts and analysts warn of a deep recession.

The Dow Jones Industrial Average tumbled 6.3 per cent, or more than 1,300 points, to close the day at 19,898.92, its first close below 20,000 since 2017.

The broad-based S&P 500 dropped 5.2 per cent to finish at 2,398.10, while the tech-rich Nasdaq Composite Index tumbled 4.7 per cent to 6,989.84.

The Dow fell as much as 10 per cent during the early afternoon, but stocks rallied somewhat near the end of the session as the US Senate passed a US$100 billion (S$144 billion) emergency package for free coronavirus testing, sick pay and other benefits related to the crisis.

In a move likely to add to the anxiety, the Intercontinental Exchange, owner of the New York Stock Exchange, said after the bell that the NYSE will temporarily close its trading floors and move fully to electronic trading beginning Monday.

The NYSE said a floor trader and an NYSE employee had tested positive for the coronavirus, but that they had not entered the stock exchange building. Trading and regulatory oversight of all NYSE-listed securities will continue without interruption, the exchange said.

With airports and hotels emptying and airlines asking staff to take unpaid leave to stem losses, the S&P 1500 airlines index sank 20.8 per cent on Wednesday. Shares in major hotel operators Hilton, Marriott and Hyatt fell by about 12% to 19%.

"The market's really reacting to fear and uncertainty and we don't think it's over until it finds a floor on stock prices. The floor will have to be found in containment of the viral spread and limiting the economic toll of the virus," said Nela Richardson, investment strategist at Edward Jones.

By Wednesday's close, the Dow was up just 0.4 per cent from where it was on Jan 20, 2017, the day of Trump's inauguration, although it remains up almost 9 per cent from when Trump unexpectedly won the presidential election on Nov 8, 2016, often referred to as the "Trump Bump."

The S&P 500 is now down about 29 per cent from the record closing high it notched on Feb 19, as the coronavirus-inspired selloff ended Wall Street's longest-ever bull run.

In one of the most dire forecasts yet issued for the potential hit from the epidemic, a JP Morgan economist said the US economy could shrink 4 per cent this quarter and 14 per cent next quarter, and for the year it is likely to shrink 1.5 per cent.

The dramatic stimulus measures have only provided short-lived bounces in equities, with investors factoring in a global recession and worrying about the duration of the damage extending into the summer.

Wednesday's selling at one point triggered another 15-minute trading cutout at a 7 per cent decline in yet another day of volatile trading. The Cboe Volatility index ended up at 76.45.

"This market went from a position of where we were fearless back at the beginning of February to some days like today where you feel hopeless about what's going on in the market," said Wayne Wicker, chief investment officer of Vantagepoint Investment Advisers.

The day's worst-performing S&P sector was the S&P 500 energy sector, which closed at its lowest level since early 2003. US crude futures fell nearly 17 per cent on Wednesday, having touched their lowest prices in 18 years.

Worries about mass debt defaults or writedowns pressured US lenders, sending the S&P 500 banking subsector down 7.9 per cent.

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Declining issues outnumbered advancing ones on the NYSE by a 12.71-to-1 ratio; on Nasdaq, a 8.79-to-1 ratio favored decliners.

The S&P 500 posted five new 52-week highs and 294 new lows; the Nasdaq Composite recorded 11 new highs and 1,214 new lows.

Volume on US exchanges was 18.51 billion shares, compared to the 14.6 billion average for the full session over the last 20 trading days.

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