New York — Stocks are slumping as more signs piled up of the economic and physical pain being caused by the coronavirus outbreak.
The Dow fell 685 points, or 3.1%, to 21,228 in midday trading. The S&P 500 stock index also dropped more than 3% while the tech-heavy Nasdaq was down 2.6%.
President Donald Trump on Tuesday warned Americans to brace for “one of the roughest two or three weeks we’ve ever had in our country.” The White House is projecting that 100,000 to 240,000 people in the U.S. could die from COVID-19. Long-term Treasury yields sank as investors moved into safer investments.
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Businesses are shutting down, and people are staying at home in hopes of slowing the spread of the virus. It’s the economic equivalent of putting a patient in a medically induced coma, said Anwiti Bahuguna, head of multi asset strategy at Columbia Threadneedle Investments: “a calculated, temporary risk with the goal of establishing greater longer-term health.”
Stocks worldwide have tumbled this year as the coronavirus pandemic forces economies into what is expected to be a steep, sudden recession. The S&P 500 just closed out its worst quarter since 2008 with a 20% loss.
The problem for investors is that no one knows how long the coma will last and how severe the damage will be during it.
A report on Wednesday said that private U.S. employers cut 27,000 jobs last month, which was actually much milder than the 200,000 that economists were expecting. The survey from payroll processor ADP used data from the week ending March 14, which was before the number of people seeking unemployment benefits exploded to a record.
Economists continue to expect Friday’s more comprehensive jobs report from the government to be dismal. The Labor Department on Thursday will release data on the number of workers who have filed for unemployment. Americans submitted a record 3.3 million jobless claims last week.
Another report showed that U.S. manufacturing activity contracted in March, reversing after two months of slight growth. The reading, though, was not as bad as economists expected.
The number of infections keeps rising, which worsens the uncertainty. The United States has more than 189,000 cases, according to a tally by Johns Hopkins University. That leads the world, which has more than 877,000 confirmed cases. More than 43,000 people have died from the virus, while more than 185,000 have recovered.
Stocks had cut some of their severe losses in recent weeks as Washington swooped in with aid for the economy and markets.
The S&P 500 jumped nearly 18% in just three days last week as Congress struck a deal on a $2.2 trillion rescue package for the economy and the Federal Reserve promised to buy as many Treasurys as it takes to get lending markets running smoothly.
Some market analysts also expect stocks to rebound in the second half of the year.
“We think that the U.S. economy will suffer a massive hit this quarter and suspect that GDP will still be a bit below its pre-pandemic trend at the end of 2021,” Hubert de Barochez of Capital Economics told investors in a research note. “Nonetheless, recessions end after activity has troughed, not when economies are back up to speed. And assuming that the virus is contained soon, we anticipate that GDP will start to rebound in the third quarter of this year.”
That means the recession now afflicting the economy, while severe, could be one of the shortest in U.S. history, he added.
