Wall Street Logs Worst Q Since 2008 03/31 15:40
Stocks fell Tuesday to close out Wall Street's worst quarter since the most
harrowing days of the 2008 financial crisis.
NEW YORK (AP) -- Stocks fell Tuesday to close out Wall Street's worst
quarter since the most harrowing days of the 2008 financial crisis.
The S&P 500 dropped a final 1.6%, bringing its loss for the first three
months of the year to 20% as predictions for the looming recession caused by
the coronavirus outbreak got even more dire. Stocks haven't had this bad a
quarter since the last time economists were talking about the worst downturn
since the Great Depression, when the S&P 500 lost 22.6% at the end of 2008.
The surge of coronavirus cases around the world has sent markets to
breathtaking drops since mid-February, undercutting what had been a good start
to the year. Markets rose early in the quarter, and the S&P 500 set a record
with expectations that the economy was accelerating due to calming trade wars
and low interest rates around the world.
But benchmark U.S. crude oil dropped by roughly two thirds this quarter on
expectations that a weakened economy will need less fuel. The yield on the
10-year Treasury dropped below 1% for the first time as investors scrambled for
safety, and it ended the quarter at roughly 0.67%. Germany's DAX lost a quarter
of its value, and South Korean stocks fell just over 20%.
The big question is if markets will get worse. At this point, no one knows.
"People are trying to digest the length and magnitude of what the
coronavirus impact is going to be," said George Rusnak, managing director of
investment strategy at Wells Fargo Private Bank.
The steep drops from Tokyo to Toronto in recent weeks reflect investors'
understanding that the economy and corporate profits are in for a sudden,
debilitating drop-off. Economies around the world are grinding to near
standstills as businesses close their doors and people hunker down at home in
hopes of slowing the spread of the virus.
But markets have also 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% for the quarter at one point, but it has climbed
15.5% since last Monday.
The Fed has promised to buy as many Treasurys as it takes to get lending
markets working smoothly after trading got snarled in markets that help
companies borrow short-term cash to make payroll, homebuyers get mortgages and
local governments to build infrastructure. Congress, meanwhile, approved a $2.2
trillion rescue plan for the economy, and leaders are already discussing the
possibility of another round of aid.
Whether markets have indeed found a bottom or whether investors have become
too optimistic about the economic rebound coming after the viral outbreak peaks
is impossible to say without knowing when the number of new infections will hit
"We're kind of on this little milestone journey with markets," said Brent
Schutte, chief investment strategist at Northwestern Mutual Wealth Management
Co. "First, we get the economic plan in place, then we have to start to see
some of the containment actions pay off. At some point it's going to be how do
we get back to work."
Among the next milestones for investors is Friday's jobs report, which is
expected to show a sharp drop in payrolls. Companies will also being reporting
their earnings results for the first quarter in upcoming weeks, and analysts
are looking for the steepest drop in profits since the start of 2016, according
The numbers may get even worse in the following quarter.
Goldman Sachs economists said Tuesday they expect the U.S. economy to shrink
34% in the second quarter, but they expect growth to rebound in the third
The S&P 500 fell 42.06 points to 2,584.59. The Dow Jones Industrial Average
lost 410.32, or 1.8%, to 21,917.16, and the Nasdaq was off 74.05, or 1%, to
The relatively modest moves are a big departure from earlier in the month,
when huge swings punished investors. The S&P 500 had its worst day since Black
Monday 1987 on March 12 with a 9.5% loss, for example, only to outdo itself
with a 12% drop two trading days later. Sandwiched in between was a 9.3% surge.
The number of known coronavirus cases keeps rising, and the worldwide tally
has topped 830,000, according to Johns Hopkins University. The United States
has the highest number in the world, more than 170,000.
Most people who contract COVID-19 have mild or moderate symptoms, which can
include fever and cough. But for others, especially older adults and people
with existing health problems, the virus can cause pneumonia and require
hospitalization. More than 41,000 have died worldwide due to COVID-19, while
more than 175,000 have recovered.
We're still not even close to peak coronavirus in the U.S. which has already
reported more cases than any other country and will sadly likely see a huge
spike in the number of deaths, meaning further lockdown measures will likely
follow," said Craig Erlam, senior market analyst at OANDA Europe. "Huge
challenges still lie ahead."