(Bloomberg) — 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 and is now at a nine-month low. 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.
In a dramatic day across assets globally:
The oil-price crash threatened to 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 coronavirus is increasingly keeping them at home. Investors are clamoring for some policy response from the Trump administration, which has so far signaled that it believes the spread is under control.
“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.”
President Donald Trump and his economic team will weigh measures later Monday to contain the fallout from coronavirus and a sudden crash in oil prices, with funding for a temporary expansion of paid sick leave and aid for battered U.S. energy producers among possible steps. 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.”
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