US stocks have plunged lower on Wednesday, with the Dow Jones industrials sinking more than 1,400 points, as investors became more fearful about the coronavirus outbreak.
The Dow’s loss dragged it 20% below the record set last month and put the index in a bear market.
The broader S&P 500 index, which professional investors watch more closely, is a single percentage point away from falling into its own bear market, which would end the longest bull market in Wall Street history.
The decline has been one of the swiftest sell-offs of this magnitude. The fastest the S&P 500 has ever fallen from a record into a bear market was over 55 days in 1987.
Vicious swings like Wednesday’s session are becoming routine as investors rush to sell amid uncertainty about how badly the outbreak will hit the economy.
The day’s loss of 1,464 points wiped out a 1,167-point gain for the Dow from Tuesday and stands as the index’s second-largest point drop, trailing only Monday’s plunge of 2,013.
With Wall Street already on edge about the economic damage coming from the virus, stocks went even lower on Wednesday after global health officials declared the outbreak a pandemic.
Investors are calling for coordinated action from governments and central banks around the world to stem the threat to the economy from the virus. Doubts are rising about what can come from the US government, though, even after President Donald Trump promised some aid.
Investors know that lower interest rates or government spending programmes alone will not solve the crisis. Only the containment of the virus can do that.
But such measures could help support the economy in the meantime, and investors fear things would be much worse without them.
The Bank of England became the latest big central bank on Wednesday to make an emergency interest rate cut in hopes of blunting the economic pain caused by the virus, which economists call the global economy’s biggest threat.
The stakes are rising as the World Health Organisation cited “alarming levels of inaction” by governments in corralling the virus when it made its pandemic declaration.
“The government probably should have been thinking about stimulus last month,” said Kristina Hooper, Invesco’s chief global market strategist. “Every day that passes makes the economic impact of coronavirus that much worse.”
Many investors are worried that a divided Congress will have trouble agreeing to any plan, she said.
Besides worries about the virus and the government’s ability to get something done for the economy, the market was also weighed down by a continued decline in oil prices, said Patrick Schaffer, global investment specialist at JP Morgan Private Bank.
“I want all retail investors to expect this environment will continue: sharp down days, sharp up days,” he said. “This feeling of whiplash that people feel probably continues for some period of time.”
The speed of the market’s declines and the degree of its swings the last few weeks have been breathtaking. The Dow Jones Industrial Average has had seven days in the last few weeks where it swung by 1,000 points. That has happened just three other times in history.