Stocks Briefly Tumble Into Correction Territory On Coronavirus Fears
Johannes Eisele/AFP via Getty Images
Updated at 12:40 p.m. ET
Stocks continued their downward slide on Thursday, with major indexes briefly falling into correction territory before a partial recovery later in the day. Investors are worried about the economic toll of a widening coronavirus epidemic.
The Dow Jones Industrial Average tumbled more than 500 points in the opening minutes of trading. The blue chip index was briefly down more than 10% from its recent peak on Feb. 12 — the technical definition of a “correction.” The broader S&P 500 index also fell 10% below its peak, reached on Feb. 19. Both indexes later climbed above the correction threshold, though they were still down for the day.
President Trump tried to project a note of calm in a news conference Wednesday evening, stressing that the United States is well prepared for any health crisis and predicting the stock market will recover, thanks in part to robust consumer spending. But investors were not immediately reassured.
A poll by Morning Consult this week found that 69% of U.S. adults are either “very” or “somewhat” concerned about the domestic economic impact of the epidemic, a 14 point increase from a few weeks ago.
Goldman Sachs lowered its forecast of corporate profits for this year and next. The firm expects zero growth in profits in 2020, as a result of reduced economic activity in both China and the U.S., reduced demand for American exports, supply chain disruptions and increased uncertainty.
The steep drop in financial markets could put a dent in consumer confidence and spending — a major driver of the U.S. economy. It may also increase pressure on the Federal Reserve to lower interest rates. On Tuesday, the central bank’s vice chairman, Richard Clarida, said the Fed is monitoring the outbreak closely but he cautioned it’s too soon to assess the economic effects.
Health officials also reported the first known case of coronavirus in the U.S. with no apparent link to China or other sources, suggesting that the virus may be spreading domestically.