U.S. stocks plunged more than 7.5% in the worst day on Wall Street since the financial crisis, as a full-blown oil price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, crude sank 20% and credit markets buckled.
The S&P 500 sank the most since December 2008, the Dow Jones Industrial Average tumbled 2,000 points and small caps lost more than 9% as investors fled risk assets with virus cases surging and the Trump administration so far unwilling to step in to soften the expected economic blow.
In a dramatic day in assets globally:
- All but nine S&P 500 companies were lower Monday, with energy producers routed by 20%. Exxon Mobil and Chevron were down more than 12%. Banks lost 11%, with an ETF that tracks regional banks had for its worst day since 2009. Apple sank 7.9% and Dow Chemical plunged 22%.
- The rout began at the open, with losses reaching 7% four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes. The markets will close if losses reach 20%. The measure is down almost 19% from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day.
- Crude tumbled the most since the Gulf War in 1991, after an OPEC Plus alliance that had contained global production disintegrated. WTI and Brent slumped by about 25%.
- The 10-year Treasury yield fell below 0.5% before climbing back to 0.57%, and the 30-year yield dropped under 0.9%, taking the whole U.S. yield curve below 1% for the first time in history.
- The Stoxx Europe 600 Index fell the most since 2016 on trading volumes exceeding three times the 100-day average. Several of the region’s gauges look set to enter bear markets. Japanese stocks entered one earlier when they tumbled almost 6%.
- A U.S. derivatives index that measures the perceived risk of corporate credit surged by the most since Lehman Brothers collapsed.
- Exchange rates including the yen saw sharp moves as traders struggled to establish where new ranges might be. The yen was up about 3% versus the dollar while the euro and Swiss franc both strengthened more than 1%.
- The oil-price crash, if sustained, would upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the COVID-19 virus is increasingly keeping them at home. Italy over the weekend effectively put its industrial heartland in the north of the country on lockdown in an attempt to halt the spread of the illness.
"The market was poised and vulnerable to this volatility and crude oil has just exacerbated it," said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. "The coronavirus itself has been the main cause of the correction, but now it's being exaggerated even further."
Equities and haven assets showed little immediate reaction to news that President Donald Trump's administration is drafting measures to blunt the economic fallout from the virus, including a temporary expansion of paid sick leave and possible help for companies facing disruption from the outbreak. A Bloomberg gauge of financial stress for the U.S. has deteriorated at the fastest pace since the great financial crisis.
"When there's panic, there tends not to be accurate pricing of assets," Kristina Hooper, Invesco's chief global market strategist, said in an interview at Bloomberg's New York headquarters. "The sell-off today to me is emblematic of that. It really is a knee-jerk reaction to what's happened over the weekend."
Elsewhere, the spread between Italy's 10-year sovereign yield and Germany's jumped 39 basis points to 218 basis points, the highest since August.
These are the main moves in markets: