The Dow Jones Industrial average plunged 870 points in early trading on Wednesday following stark predictions of a rising U.S. death toll and economic damage from the coronavirus outbreak, a day after the index ended its worst first quarter in history.
President Donald Trump on Tuesday warned Americans of a ‘very, very painful’ two weeks, with White House health officials modeling an enormous jump in virus-related deaths even with strict social distancing measures.
Cleveland Federal Reserve Bank President Loretta Mester said reports measuring U.S. economic activity are likely to be ‘very bad’ in the first half of 2020 and the unemployment rate could rise above 10 percent due to efforts to stem the virus outbreak.
At 9.31am, the Dow was down 878.18 points, or 4.01 percent, at 21,038.98.
The New York Stock Exchange is seen quiet earlier this week. Stocks were set to drop after Trump warned the next two weeks would be ‘very, very painful’
The rapid worldwide spread of the disease has forced entire countries to shut down, stalling business activity and raising fears of corporate defaults.
The S&P 500 lost about $5.6 trillion in market value to post its worst first quarter on record, while the Dow Jones ended Tuesday with its biggest quarterly fall since 1987.
With the number of infections still rising in most regions, ‘If anything, the worst is yet to come, and some of the world’s largest emerging markets are still to feel the full onslaught of COVID-19,’ said Jeffrey Halley, senior market analyst with Oanda.
Markets have cut their losses in recent weeks on hopes that massive aid from governments and central banks around the world can blunt the blow.
The S&P 500 was down nearly 31 percent for the quarter at one point, but it has climbed 15.5 percent since last Monday.
Among the next milestones for investors is Friday’s U.S. jobs report, which will likely show a sharp drop in payrolls.
Companies soon will also begin reporting their earnings results for the first quarter. Analysts are looking for the steepest drop in profits since early 2016, according to FactSet.
In the latest sign of the economic toll of the health crisis, U.S. private payrolls dropped in March for the first time since 2017, supporting views that the longest employment boom in history ended last month.
‘Talk of a bottom in equity markets still seems remarkably premature given the continued increase in infection and death rates across Europe and the United States,’ said Michael Hewson, chief market analyst at CMC Markets in London.
The federal government has responded with a $2.2 trillion rescue package, the largest in history, as the Federal Reserve pumped trillions in liquidity into bond markets.
‘There is no easy way to quantify either the economic shutdown or what the eventual recovery is going to look like as the monetary and fiscal policy initiatives are as historic as the economic decline,’ said Art Hogan, chief market strategist at National Securities in New York.