Wall Street's Brutal Week Slashed Nearly 3,600 Points From Dow

Feb 28, 2020
Originally published on February 29, 2020 9:34 am

Updated at 5:40 p.m. ET

Stocks took another steep dive Friday, deepening a multi-day rout fueled by fears about the coronavirus' impact on the global economy.

The Dow Jones Industrial Average fell 357 points on Friday, capping a week in which the blue chip index fell 3,583 points or 12.4%. The Dow is down 16.3% from its recent peak on Feb. 12.

The S&P 500 stock index lost 11.5% for the week and is now down 14.6% from the all-time high it reached only last week.

The Nasdaq inched into positive territory in the closing minutes of trading Friday, but is still down 10.5% for the week and 14.6% below its record high last Wednesday.

The drop in stocks this week has come with stunning speed, as investors grapple with evidence that the deadly coronavirus epidemic is spreading beyond China to other countries, including Italy, South Korea and Iran.

"It's unprecedented, really. And certainly in my career, and even if you go back 70 years, we've never had a correction--that is a 10% pullback from a high--develop so quickly," said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute.

Federal Reserve Chairman Jerome Powell sought to calm jittery investors, with reassurance that the central bank is prepared to cut rates if necessary.

A pedestrian walks past a board displaying the closing figure of the Nikkei Stock Average in Tokyo on Friday. All of the major indexes are now in what the markets call a correction, and stocks also were down in Asia and Europe.
Tomohiro Ohsumi / Getty Images

"The fundamentals of the U.S. economy remain strong," Powell said in a rare, written statement. "However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."

The Trump Administration argued that the plummet in stock prices was unlikely to affect the broader economy.

Larry Kudlow, director of the National Economic Council, called the downturn a "short-term market plunge" and said, "I don't think at this point it's going to have much of an impact."

Kudlow said he had spoken to corporate CEOs and had not heard of serious supply-chain problems.

But investors appear anxious anyway, and the interest rate on U.S. government debt, which usually falls in turbulent times, lost more ground. The 10-year Treasury bill dipped to a record low of 1.15%.

"Uncertainty regarding something as serious as this has a tendency to induce the kind of fear that in in the market's view is 'sell [first] and ask questions later,'" said Quincy Krosby, chief market strategist at Prudential Financial.

With the S&P 500 index down 14.6%, the market is officially in what Wall Street calls a market correction when stocks are at least 10% below a recent high.

All three major stock indexes posted their largest ever point drops on Thursday.

Companies around the world are cutting production and canceling conferences to limit the outbreak's spread. JPMorgan Chase announced it is eliminating nonessential employee travel, while United Airlines said today it is reducing flights to Japan, Singapore and South Korea.

As businesses slow down, economists say the odds of a global recession have increased significantly.

"With the coronavirus pandemic spreading throughout the world, falling corporate sales and its economic impact will depress economic growth," wrote Sung Won Sohn, professor of economics at Loyola Marymount University.

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SCOTT SIMON, HOST:

U.S. stock markets, of course, are closed for the weekend, and perhaps not a moment too soon for many investors after a dizzying drop in the market over the last five days. The Dow Jones Industrial Average lost almost 3,600 points during the week, or more than 12%. Other market indexes also suffered losses. Investors worry that the fast-spreading coronavirus may be - may do lasting damage to the economy.

NPR's chief economics correspondent Scott Horsley joins us. Scott, thanks so much for being with us.

SCOTT HORSLEY, BYLINE: Good to be with you.

SIMON: Please help us put all these stock market losses in perspective. How bad was this sell-off?

HORSLEY: This was the worst week since the financial crisis back in 2008. And it's all the more striking because up until this week, investors had been pretty exuberant. You know, the S&P 500 hit a record high just 10 days ago. The Dow notched its own record a week before that. So we have seen a real 180 in the way investors are looking at the coronavirus and its potential cost for the U.S. and global economies.

Scott, we've already seen a big decline in global shipping. President Trump warned yesterday the administration is considering additional travel restrictions. The State Department's now cautioning Americans not to travel to Italy. All that is a drag on the economy, and it could get bigger if we see local or regional quarantines.

SIMON: An unusual statement yesterday for the chairman of the Federal Reserve, Jerome Powell. What's his message?

HORSLEY: Powell is trying to calm some of these market jitters. He put out a statement about 90 minutes before the closing bell yesterday. He stressed the fundamentals of the U.S. economy are strong, but he did acknowledge the virus poses what he calls evolving risk to the economic activity. The Fed chairman said he and his colleagues are monitoring developments closely and will use their tools as appropriate to support the economy. That's basically a signal that the central bank is prepared to cut interest rates if necessary.

Now, the market continued to seesaw after that statement came out, so it's hard to say just how reassured investors were, but stocks did regain some of the lost ground at the very end of the day. So, in fact, the Nasdaq managed to inch into positive territory. So while it was still a very bad week on Wall Street, that late-day bounce kept it from being even worse.

SIMON: The White House is trying to reassure the American public. In the welter of all the discouraging news, is that message getting through?

HORSLEY: It was kind of hard to hear that message over the din of falling stocks, but certainly, the White House is focused on this. Obviously, President Trump likes to boast about the stock market when it's going up, and he's staking a lot of his reelection hopes on a strong economy. Larry Kudlow, the financial commentator-turned-White House economic adviser, did go in front of the TV cameras yesterday to try to play cheerleader, as he often does. Even Kudlow sounded a little more somber than usual. He said the important thing is not to overreact.

(SOUNDBITE OF ARCHIVED RECORDING)

LARRY KUDLOW: I just don't think anybody ought to panic right now. We are going to stay the course on our policies - tax cuts and deregulation and energy and trade. And the economy is sound.

HORSLEY: The president himself said on Wednesday he thought the stock market would recover, thanks in part to strong consumer spending. But there's a real question now about whether consumers will keep spending so freely when their retirement accounts have taken such a beating. That's one of the things the Fed could be looking to address if it does cut interest rates. It was pointed out this week that we really need a coronavirus vaccine more than a rate cut, but a vaccine is at least a year away, and the Fed's rate-setting committee is set to meet in just 2 1/2 weeks.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.