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NEW YORK — Stocks are closing sharply lower as fears of a prolonged coronavirus-induced recession take hold. The Dow industrials lost more than 1,300 points, or 6.3%. After a brutal few weeks, the Dow has now lost nearly all of its gains since President Donald Trump’s inauguration.
The losses March 18 deepened after a temporary halt was triggered in the early afternoon. Even prices for investments seen as very safe, like longer-term U.S. Treasurys, fell as investors rushed to raise cash. The price of oil fell 24% and dropped below $21 per barrel for the first time since 2002.
Stocks tumbled close to 8% on Wall Street on March 18 and wiped out the last of the gains for the Dow Jones Industrial Average since Trump’s inauguration. Even prices for investments seen as very safe fell as investors rushed to raise cash and the coronavirus pandemic continues to spread.
Also March 18, the New York Stock Exchange announced it will temporarily close its iconic trading floor in lower Manhattan and move to all-electronic trading beginning March23 as a precautionary step amid the coronavirus outbreak.
The trading floors of the NYSE and the NYSE American Options market in New York will be closed, as well as that of the NYSE Arca Options in San Francisco.
“NYSE’s trading floors provide unique value to issuers and investors, but our markets are fully capable of operating in an all-electronic fashion to serve all participants, and we will proceed in that manner until we can re-open our trading floors to our members,” said Stacey Cunningham, the NYSE's president.
The exchanges will continue to operate under normal trading hours, she added.
Bloomberg News reported that a notice to traders revealed that two individuals were screened on March 16 and tested positive for coronavirus. The NYSE employee and a person who worked on the trading floor both were barred from entering the building this week and were last inside on March 13.
Markets have been incredibly volatile for weeks as Wall Street and the White House acknowledge the rising likelihood that the outbreak will cause a recession. The typical day this month has seen the stock market swing up or down by 4.9%. Over the last decade, it was just 0.4%.
It was just a day before that the Dow surged more than 5% after Trump promised massive aid to the economy, but the number of infections keeps climbing, and the Dow slumped to its lowest level since 2016. The S&P 500, which dictates how 401(k) accounts perform much more than the Dow, is down 31% from its record set last month, though it’s still up nearly 9% since Election Day 2016.
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The S&P 500’s slide was so sharp that trading was halted for 15 minutes March 18. The losses deepened after trading resumed, and the S&P 500 was down 7.9%, as of 3:20 p.m. ET.
As big swaths of the economy retrench while much of society comes to a halt in an attempt to slow the spread of the virus, investors have clamored for Congress, the Federal Reserve and other authorities around the world to support the economy until it can begin to reopen.
They got a big shot of that March 17, when the Trump administration briefed lawmakers on a program that could surpass $1 trillion and the Fed announced its latest moves to support markets.
But the worldwide number of known infections has topped 200,000, which creates more uncertainty about how badly the economy is getting hit, how much profit companies will make and how many companies may go into bankruptcy due to a cash crunch.
“It’s, it’s a very tough situation,” Trump said at a news conference, during which losses for stocks accelerated. “You have to do things. You have to close parts of an economy that six weeks ago were the best they’ve ever been. ... And then one day you have to close it down in order to defeat this enemy.”
Traders react at the New York Stock Exchange on March 18. (Mark Lennihan/Associated Press)
“The volatility is going to be here to stay,” said Brian Nick, chief investment strategist at Nuveen. “It’s about the virus and not the economic response.”
The selling March 18 swept markets around the world. Benchmark U.S. oil fell 24% and dropped below $21 per barrel for the first time since 2002. European stock indexes lost more than 4% following broad losses in Asia. Even prices for longer-term U.S. Treasurys, which are seen as some of the safest possible investments, fell as investors sold what they could to raise cash. Gold also fell.
“They’re just saying, ‘I may take some losses here, but if we have cash we can deploy it when we know more,’ ” said J.J. Kinahan, chief strategist with TD Ameritrade. “The problem for the market really is we just don’t know anymore. And until we really know where things are at, you may see people who just want to have as much cash as possible.”
The bond market is also operating under strain, and it hasn’t been this difficult for buyers to find sellers at reasonable prices since the financial crisis of 2008, said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle Investments.
Investors are selling their highest quality bonds to raise cash, thinking they will be the easiest to sell and will hold up the best. That’s paradoxically undercutting their prices further.
Also exacerbating moves is so many traders making these trades not from their office.
“I’m calling the Citigroup dealer, who’s on his home Wi-Fi with his kid in the living room,” Tannuzzo said. “That causes gaps” in pricing.
For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems, and recovery could take six weeks in such cases.
“These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,” Deutsche Bank economists wrote in a report March 18.
With all the uncertainty and early evidence that China’s economy was hit much harder by the virus than earlier thought, they now see “a severe global recession occurring in the first half of 2020.”
But they also are still forecasting a relatively quick rebound, with activity beginning to bounce back in the second half of this year in part because of all the aid promised from central banks and governments.
Stan Choe, Damian J. Troise and Alex Veiga contributed to this report.
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