By Sanjana Shivdas and Medha Singh
(Reuters) – U.S. stock indexes are down 8% at midday Monday, as the Federal Reserve’s drastic interest rate cut to near zero stoked fears of a coronavirus-driven recession.
Trading on Wall Street’s three main stock indexes was halted for 15 minutes shortly after the open, the third such pause in six days, as the S&P 500 index plunged 8%, triggering an automatic cutout.
The benchmark index slid as much as 11.4%, shedding about $2 trillion in market value, before bargain hunting helped the indexes claw back some losses.
A sharp cut in interest rates by the Federal Reserve ahead of schedule and its pledge of massive asset purchases added to the alarm about the pandemic that has paralyzed supply chains and squeezed company revenue.
“It’s not just about a reduction in earnings growth, or that you will have not have earnings growth. There’s credit concerns and cashflow concerns, that’s why the Fed acted,” said Tom Martin, senior portfolio manager at GlobAlt Investments in Atlanta.
“You have a lot of evidence that things are still in the process of getting bad and we don’t really know how bad.”
Underscoring the economic blow of the outbreak, severe virus containment measures sent China’s factory production tumbling at its fastest pace in three decades.
Rate-sensitive financial stocks plunged 9.3%, leading declines among the major S&P sectors. The sector also came under pressure after the big U.S. banks said they would stop buying back shares.
Energy stocks tracked a near 10% slump in oil prices, while technology stocks shed 7.6%.
Apple Inc, Microsoft Corp and Facebook Inc fell more than 7% each and were the biggest drags on the S&P 500.
Wall Street’s fear gauge jumped 17.24 points to 75.29.
As bars, restaurants, theaters and movie houses in New York and Los Angeles were ordered shut, U.S. states pleaded with the Trump administration to coordinate a national response to the outbreak.
The S&P 500 retail index fell 9.3% as Nike Inc, Lululemon Athletica Inc and Under Armour Inc said they would close stores in the United States and some other markets.
At 1:15pm ET, the S&P 500 was down 213.28 points, or 7.87%, at 2,497.74, the Dow Jones Industrial Average was down 2,051.04 points, or 8.85%, at 21,134.58 and the Nasdaq Composite was down 627.64 points, or 7.97%, at 7,247.24.
Declining issues outnumbered advancers for an 11.97-to-1 ratio on the NYSE and an 8.07-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week high and 322 new lows, while the Nasdaq recorded three new highs and 1,182 new lows.
Another 2,000-point drop for the Dow will wipe out the entire Trump-bump, taking the index to levels seen before the presidency of Donald Trump.
The S&P 1500 airlines index slumped 8.1% as United Airlines Holdings Inc’s March revenue fell $1.5 billion and the airline warned employees that planes could be flying nearly empty into the summer.
Reporting by Sanjana Shivdas in Bengaluru; Additional reporting by Thyagaraju Adinarayan Editing by Sagarika Jaisinghani and Saumyadeb Chakrabarty.
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Source: Reuters
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