US stocks plummet on coronavirus fears: March 9, 2020
Bank regulators are urging financial institutions to work with borrowers in communities hurt by the coronavirus pandemic.
In a joint statement released by federal and state regulators Monday evening, the group said that “financial institutions should work constructively with borrowers and other customers in affected communities.”
The regulators said "prudent efforts" to provide financial relief to stressed borrowers will not be subject to "criticism" from authorities.
In other words, regulators are giving the green light for banks to take a more lenient stance towards struggling businesses and households.
Of course, some banks will also be struggling during the coronavirus outbreak. Shares of major US banks including Bank of America and JPMorgan Chase plunged more than 10% apiece Monday.
The agencies, which include the Federal Reserve, FDIC and Consumer Financial Protection Bureau, also offered to provide "appropriate regulatory assistance" to banks. That includes granting requests in scheduling bank exams or inspections "to minimize disruption and burden."
The Dow fell 7.8% Monday. The last time that happened -- October 15, 2008 -- the economy was plunging in the midst of a global financial crisis. It was one of deepest recessions since the Great Depression.
San Francisco Federal Reserve Bank President Janet Yellen (years before she became Fed chair) said that day the US economy "appears to be in a recession," something many economists, but few Fed officials, had said at that point.
A report on retail sales fell to a 3-year low, and a manufacturing report in the New York area sank to an all-time low that day.
Investors panicked. The Dow fell 733 points, or 7.9%. At the time, it was the second-biggest point decline ever, and it remains the worst percentage decline since October 26, 1987.
How's that for context about how bad Monday was?
It was a turbulent day in the US stock market, which experienced a massive selloff amid coronavirus fears and a sharp drop in oil prices.
The Dow had its worst point drop on record, overtaking the massive loss from February 27, less than two weeks ago. The index closed down 2,014 points, or 7.8%. It was its worst day since October 2008.
Stock futures trading was halted following steep losses in the overnight session, which carried into regular trading: Shortly after the market open the S&P 500 tumbled 7%, triggering a circuit breaker and forcing the New York Stock Exchange to suspend trading for 15 minutes.
Stocks remained in the red all day. The S&P 500 slumped 7.6% and the Nasdaq Composite declined 7.3%. It was the worst day for both indices since December 2008.
All three are now nearly 20% below their most recent highs, which is the definition of a bear market. If stocks fall further tomorrow, they will have slid from record highs to a bear market in a matter of weeks.
Although oil prices are plunging, it seems that investors don't expect consumers to splurge on new cars if the coronavirus concerns lead to a recession.
But does that mean consumers will hang on longer to older vehicles and spend what it takes to fix them up?
That's what the market appears suggest. Auto parts retailers O'Reilly (ORLY), AutoZone (AZO) and Advanced Auto Parts (AAP) each rallied Monday. In fact, AutoZone was the big winner on Wall Street, with a gain of more than 5% that made it the best performing stock in the S&P 500. (O'Reilly and AAP each were up 2%.)
So investors looking to cheer themselves up after today's brutal session might want to consider singing the "O O O O'Reilly!" jingle, followed by a round of "Get in the Zone. AutoZone!"
It was an ugly day in the oil market -- the ugliest since 1991.
Oil prices suffered an historic collapse Monday after Saudi Arabia shocked the market by launching a price war against onetime ally Russia.
US oil prices crashed as much as 34% to a four-year low of $27.34 a barrel as traders brace for Saudi Arabia to flood the market with crude in a bid to recapture market share.
Crude settled with a staggering loss of nearly 26% to settle at $31.13 a barrel. Brent crude, the global benchmark, plunged 24% to close at $33.36 a barrel.
Both oil contracts fell to four-year lows.
Bond giant Pimco is gearing up for a brief recession, according to a blog post from the firm's global economic adviser Joachim Fels.
We see a distinct possibility of a technical recession in the US and the euro area during the first half of 2020, followed by a recovery in the second half as output and demand normalize," Fels wrote.
A technical recession is defined as two consecutive quarters of negative growth. Japan likely is already in one, Fels said.
The spread of coronavirus has not yet peaked outside of China, but Fels said the bank assumes it will do so over the next several months. This underpins Pimco's thesis for a U-shaped trajectory for global growth. At the start of that pattern, however, there will be a steep drop in economic activity.
Pimco expects the Federal Reserve to step in and cut interest rates at least another half-percentage point to keep financial conditions accommodative.
"In addition, we expect most governments to put in place further fiscal easing to support demand and help the healing of the economy once the virus subsides," Fels said.
Monday's stock market plunge is bringing back painful memories of 2008 -- and leading to fears that the coronavirus outbreak will cause a global recession and bear market. But BlackRock (BLK), the Wall Street firm run by Larry Fink that just so happens to be the largest asset manager in the world, is urging investors to take a deep breath and relax.
"We do not think this is 2008," said analysts with the BlackRock Investment Institute, in a special report Monday.
"The virus shock’s impact will likely be large and sharp, but we believe investors should be level-headed, take a longterm perspective and stay invested. The economy is on more solid footing and, importantly, the financial system is much more robust than it was going into the crisis of 2008," the BlackRock analysts added.
The key to stopping the market selloff will be a "preemptive and coordinated policy response," said the influential BlackRock, which has $7.4 trillion assets under management including $2.2 trillion in popular iShares ETFs.
The Federal Reserve already cut interest rates by a half-point in an emergency move last week and traders are betting on an even bigger cut -- perhaps all the way back to 0% -- at the Fed's regularly scheduled meeting on March 18. But BlackRock also said more fiscal stimulus from lawmakers and the White House is needed.
NBCUniversal quietly sold its entire stake in Snapchat’s parent company, Snap, last year, according to an SEC filing dated January 30.
In March 2017, NBCUniversal acquired a $500 million stake in Snap as part of the social network’s initial public offering.
Snap stock fell more than 11% on Monday afternoon amid the broad market selloff. The Hollywood Reporter was the first to report the news.
In the years following its IPO, Snap has struggled to prove it can achieve a mainstream audience on par with rivals like Instagram and Facebook, which have both blatantly copied its most popular features, such as Stories that disappear after 24 hours. The 2017 redesign of its photo-sharing app was also met with backlash, and millions of users fled the platform. While the company has since bounced back and has steadily added users, its most recent quarterly report disappointed investors.
Recession fears are crushing small American stocks.
The Russell 2000 index of small-cap stocks plummeted 9% Monday and is on track to close in a bear market. The index is viewed as a barometer for confidence in the American economy.
A bear market would reflect a 20% decline from the record high set in January.
Bear markets are more common in small-cap stocks, which are very exposed to swings in the economy. The Russell 2000 has dropped into three previous bear markets since US stocks bottomed in March 2009, yet the broader markets did not follow suit.
The most recent example occurred in December 2018, when recession jitters similarly rocked Wall Street, driving the Russell 2000 into a bear market.
Other economically-sensitive stocks also fell sharply Monday, including large American banks. JPMorgan Chase tumbled 13%, while Bank of America plunged 16%.