Broken promise from Trump adds to worries of major blow to world’s largest economy
by Jeremy Herron and Vildana Hajric
U.S. stocks plunged after the World Health Organization called the spreading coronavirus a pandemic and the Trump administration remained unable to detail any stimulus measures to combat the economic fallout. Treasuries rallied.
The S&P 500 wiped out Tuesdsay’s gain and the Dow Jones Industrial Average stared down a bear market after the WHO declaration and no stimulus plans from President Donald Trump. Crude slumped toward $33 a barrel, and the yen rallied. Gold futures fell. Treasuries resumed gains after briefly erasing them ahead of a government auction.
Trump broke his Tuesday promise to deliver a sweeping stimulus package, while European officials signaled a growing willingness to move soon to combat the virus’s effects on the region’s economy. Goldman Sachs slashed its forecast for the S&P 500 and said the bull market will end. Capital One became the latest company to advise employees to work from home, while colleges continued to move classes online and the death rate in Italy jumped 31%.
“We have no idea when the coronavirus, the spread, is going to subside. That uncertainty is going to continue to create a lot of volatility,” said David Spika, the president of GuideStone Capital Management. “We have no idea how to model it, we have no idea what to expect from it.”
Here are the main moves in global markets:
- All 11 groups in the S&P 500 sank at least 4.2%. The index is lower for the 12th time in 15 sessions, and down 19% from its all-time high.
- Boeing plunged 13% after it said it plans to draw down all of a $13.8 billion loan.
- European equities wiped out a 2.3% advance sparked by an emergency rate cut in the U.K.
- Municipal bonds tumbled, sending rates on 10-year benchmark state and local government debt higher by 22 basis points, the most since records began in 2011.
- The yen surged 1%, while the euro advanced with the pound.
- Asian equities lost 1.7%.
Financial markets whipsawed this week as investors grappled with the potential economic hit from the virus that is upending daily routines around the world. Policy makers have grown increasingly ready to take action, with the ECB indicating it may move as soon as this week, the Bank of England cutting rates and German Chancellor Angela Merkel pledging to do “whatever is necessary” to bolster the economy.
In the U.S., the Trump administration continues to promise “major” stimulus, but details remain uncertain. Democrats plan to urge the president to declare a national state of emergency. Markets are now growing worried that whatever does come will not have the ability to stave off a major blow to the world’s largest economy.
“Every day we get whipsawed back and forth, and what we’re seeing today is general disappointment that fiscal policy is not at all clear in how it’s going to stimulate the economy,” said Michael Reynolds, an investment strategy officer at Glenmede Trust Co.
Meanwhile, Joe Biden cemented his position as front-runner for the U.S. Democratic presidential nomination with primary victories Tuesday, further easing concerns among those opposing Bernie Sanders’s progressive platform.
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