Dow plunges as much as 1,086 points, stocks face worst week since 2008

Coronavirus-fueled panic pushed US stocks further into correction territory on Friday, putting them on track for their worst drop since the 2008 financial crisis.

The Dow Jones Industrial Average sank as much as 1086.07 points, or 4.3 percent, after the opening bell following the blue-chip index’s worst single-day drop in its history on Thursday. The Dow later pared the losses and was recently off 513.55 points, or about 2 percent, at 25,253.09, bringing the week’s total loss to more than 3,700 points.

The Nasdaq composite and S&P 500 tumbled as much as 3.5 and 4.1 percent, respectively, after the latter index posted its fastest-ever correction, which is defined as a 10 percent fall from the recent peak. The S&P tumbled 4.4 percent Thursday to close at 2,978.76 just six trading days after reaching a record high.

Efforts to contain the virus have crippled supply chains worldwide and stifled business investment, raising anxiety about economic fallout that could last for months. On Thursday, Goldman Sachs said it now expects US companies will post zero earnings growth for 2020.

Traders are now pricing in an interest rate cut by the Federal Reserve as soon as next month, but many have expressed doubts about how this would mitigate the impact of the outbreak. On Friday, Goldman Sachs said it sees as many as three rate cuts from March through June to stanch the outbreak’s economic damage.

But St. Louis Fed president James Bullard threw some cold water on that notion Friday, saying an interest rate cut would only be on the table if the virus grew into a full-blown pandemic.

“Further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time,” Bullard said.

White House National Economic Council director Larry Kudlow also urged investors to calm down, saying he thinks the market “has gone too far.”

“I just don’t think anybody ought to panic right now,” Kudlow told reporters. “We’re going to stay the course on our policies.”

The selloff is keeping its momentum because of uncertainty over how consumers might react if the virus hits the US harder, according to Eric Marshall, director of research at Hodges Capital.

“I think the market just doesn’t know how to discount that unknown,” Marshall said. “Does this affect my ability to go to work and take care of my family and send my kids to school and all of those things?”

In one early sign of how the epidemic is changing American consumers’ thinking, more than 27 percent of those surveyed this week said they are already limiting visits to public areas such as shopping centers or avoiding them altogether, according to Coresight Research.

Consumer “demand shock” could hit the US in the event that number of confirmed cases rises within the country — especially if the outbreak forces schools to close as it has in Japan, said Wouter Jongbloed, head of political risk analysis at Exante Data.

“Especially when it gets out of California and starts appearing more broadly through the continental US, that’s something when the US consumer will be spooked much more than it is now, and will resemble the European response much more,” Jongbloed said.

International markets also plummeted again Friday as more virus cases emerged in other Asian countries and in Europe. Tokyo and Shanghai’s major stock indexes each closed down about 3.7 percent and Germany’s DAX index tumbled as much as 5.2 percent before paring the losses. London’s FTSE 100 and Paris’s CAC 40 indices were recently down 3.5 and 4 percent, respectively.

“The widening spread of COVID-19 globally is triggering alarm amongst investors,” Eugene Leow and Chang Weiliang of Singapore-based DBS Bank wrote in a Friday report. “Increased risk aversion from pandemic fears is evident from a tumble in European and the US equities this week.”

This week has been the worst since 2008 for world stock markets, with some $5 trillion falling off the total market value of the MSCI All Country World Index, which tracks nearly 50 nations.

Fears about the deadly coronavirus’ worldwide spread and uncertainty about how it will affect economic growth have caused a panic on Wall Street this week as the number of cases climbed outside China, where the outbreak started.

The coronavirus caused more bad business news to trickle in overnight: Tokyo Disneyland said it would close through March 15 over concerns about the outbreak, and Korean automaker Hyundai shut down a factory after a worker tested positive for the virus.

And the Geneva International Motor Show was canceled after the Swiss government banned public gatherings of more than 1,000 people, adding to the reported list of scrapped conventions that includes the Mobile World Congress smartphone tradeshow and Facebook’s F8 developer conference.

With Post wires