The New York Stock Exchange tripped the “circuit breaker” at a time of relentless volatility for global stocks.
“The uncertain economic impact of coronavirus continues to grip markets, with stocks, commodities and interest rates all dropping sharply,” Greg McBride, chief financial analyst at Bankrate.com, wrote in a commentary on Monday. “Markets hate uncertainty and there is a ton of it currently in play.”
The forced 15-minute brake seemed to have a stabilizing effect; by early afternoon, the Dow had pared its losses to roughly 1,600 points, or about 6.1 percent. The S&P 500 was down 5.8 percent and the Nasdaq off 5.0 percent.
Oil prices tumbled into the $30s, after Saudi Arabia and Russia deadlocked over production. The Saudis had been pushing for a cut in output to prop up prices, but reversed course when Russia balked and decided, instead, to flood the market with hundreds of thousands of additional barrels per day — a move analysts fear may trigger a price war.
“Cheap oil is one thing. Super cheap oil is another,” said John Kilduff of Again Capital. “The stock market is looking at the oil price plunge as a canary in the coal mine of a disinflationary one-two punch, driven partly by cratering demand for transportation fuels and a wanton price war among the major oil producers” that will result in big losses for U.S. and Canadian producers.
Global markets were apoplectic. Japan’s Nikkei closed down more than 5 percent, while Hong Kong’s Hang Seng Index shed more than 4.2 percent. European markets tumbled more than 7 percent across the board.
Panic pushed the yield on the U.S. 10-year Treasury below 0.4 percent for the first time in history Monday as investors fled for safe havens. The trajectory could be an ominous sign of a weakening economy, because a low yield can indicate a lack of confidence in economic growth. Yields decline as bond prices rise.
Confirmed U.S. coronavirus cases surpassed 500 over the weekend, with cases in 30 states and the District of Columbia. There are more than 100,000 infections worldwide and thousands of deaths.
March 9, 2020 at 12:19 PM EDT
The stock and oil markets are sending a message about coronavirus: The recession risk is real.
Pick just about any market — stocks, bonds, oil — and it’s sending a signal that investors around the world think there’s a high probability of a recession.
J.P. Morgan sent around a note to clients late last week saying markets were indicating a 90 percent chance of a recession, a term that generally means six straight months of economic contraction. The picture looks worse now, especially in the bond market. Last week, Wall Street panicked when the yield on a marquee government bond — the U.S. 10-year Treasury — fell below 1 percent. That had never happened before. Now that yield is below 0.5 percent, a jaw-dropping situation that didn’t even occur during the Great Recession.
By Heather Long
March 9, 2020 at 12:17 PM EDT
Oil price war threatens widespread collateral damage
The oil price war Saudi Arabia launched against Russia over the weekend sent crude prices into one of the steepest falls in history Monday, causing casualties for oil field workers, U.S. shale drillers, investors and members of the Organization of the Petroleum Exporting Counties that rely on oil to make their budgets add up.
Moscow’s refusal to cut its oil output by half a million barrels a day shattered the unusual three-year marriage of OPEC, led by the Saudis, and major non-OPEC producers, led by Russia, as oil producers scrambled to find a way to respond to weakening global demand resulting from the deepening crisis over the coronavirus.
Saudi Arabia, angered by Moscow’s position, said Sunday that it would open its spigots and drive down prices, making this oil price cycle the only one in nearly a century to combine weak demand with a global price war.
Global markets opened down sharply Monday, with the leading benchmark varieties of crude tumbling more than 20 percent after other big falls in recent weeks. The drop was the steepest since prices plunged 35 percent Jan. 17, 1991, the day the U.S.-led coalition launched Operation Desert Storm to force Iraq to withdraw from Kuwait.
The plunge in prices, however, will also benefit consumers who should see markedly lower prices at the pump. For them, the price war will act like a tax cut, putting more money in the pockets of motorists.
By Will Englund and Steven Mufson
March 9, 2020 at 11:48 AM EDT
With global economy in balance, the White House and Fed are at odds over how to help
As he concluded meetings in Saudi Arabia on Feb. 23, Federal Reserve Chair Jerome H. Powell sent urgent emails to his staff about the coronavirus. The outbreak was escalating in South Korea, Italy and Iran, and the central bank needed to intensify its response to the economic shock.
While Fed economists began to run through scenarios of what could go wrong, senior White House officials both privately and publicly maintained that there was virtually no reason for concern. On Feb. 25, as Powell began meeting with staff to prepare contingency plans, White House economic adviser Larry Kudlow said the United States had an almost “airtight” containment on the outbreak, a day after urging investors to “buy these dips” in the stock market.
The coronavirus is threatening the economy, with supply chains stalling, tourism falling sharply and the oil markets plunging 30 percent on Sunday night. Yet U.S. economic leaders are divided about how to respond, with Powell and his Trump administration counterparts, Kudlow and Treasury Secretary Steven Mnuchin, differing in their assessments of the risks as well as the policies best suited to address the economic threat.
Not only do the Fed and White House appear to disagree on the severity of the potential economic hit, they’re at odds about the power of interest rate cuts to stem the panic. Trump and Kudlow have emphasized the Fed’s power to cut interest rates as the primary economic response to the crisis. But although they have moved to cut rates, Powell and others at the Fed have suggested that they have only a limited role to play, with some Fed officials arguing that spending or tax stimulus from Congress and the president would have a greater effect.
By Heather Long and Jeff Stein
March 9, 2020 at 11:39 AM EDT
President Trump downplays sell-off, says price war is ‘good for the consumer’
President Trump tried to rein in panic surrounding Wall Street’s meltdown in tweets Monday, even as he privately considered a menu of policy options to limit the economic fallout from the coronavirus. He blamed the sell-off on oil concerns rather than the virus’s growing presence in the United States and said the oil skirmish would be “good for the consumer.”
“Nothing is shut down, life & the economy go on,” Trump tweeted. “At this moment there are 546 confirmed cases of CoronaVirus, with 22 deaths. Think about that!”
Speaking to reporters on the sidelines of a women’s summit at Northeastern University, House Speaker Nancy Pelosi (D-Calif.) ascribed the stock market’s plunge to the uncertainty emanating from the Trump administration amid the coronavirus crisis.
“We would hope that what is coming out of the White House will be more consistent,” Pelosi said.
By Taylor Telford
March 9, 2020 at 11:38 AM EDT
‘Everybody is trying to move at warp speed,’ lawmaker says as Democrats rush paid sick leave effort
House Speaker Nancy Pelosi (D-Calif.) plans to meet Monday evening with key committee chairs to discuss legislation that could provide paid sick leave and other benefits to Americans hurt by the fallout of the coronavirus outbreak.
Rep. Rosa DeLauro (D-Conn.), a senior member of the House Appropriations Committee, told reporters on a conference call that Congress should move forward rapidly with an economic response package and talks are picking up in speed.
“I believe that this is precisely the direction we need to go in. There are the economic consequences from the crisis that are of equal concern as responding on the health care side,” DeLauro said. She added that “everybody is trying to move at warp speed.”
DeLauro floated the policy change to Vice President Pence last week and she said she was told he would present the idea to President Trump. It’s unclear precisely how it would work or what the potential cost might be.
By Erica Werner
March 9, 2020 at 11:02 AM EDT
White House advisers to give President Trump policy options for coronavirus response, including paid sick leave
White House advisers on Monday plan to present President Trump with a list of policy changes they hope could stem the economic fallout of the coronavirus, including paid sick leave and emergency help for small businesses, according to a senior administration official.
The menu of options is expected to be offered to Trump this afternoon when he returns from Florida. The list of potential ideas includes deferring taxes on specific industries hit by the coronavirus downturn, such as the hospitality and travel industries, as well as a “cashflow injection” for small businesses through the Small Business Administration.
The senior administration spoke on condition of anonymity and would not give more details about other options under consideration. The White House has faced intense pressure to arrest falling markets and stabilize an economy that investors increasingly fear may tip into recession. Many Democrats, meanwhile, are insisting that the government implement paid sick leave policies to help Americans who are forced to stay home because they are sick.
By Jeff Stein
March 9, 2020 at 10:58 AM EDT
Dispute between Saudi Arabia, Russia sparks rapid decline in oil prices
Oil prices tumbled below $35 on Monday after Saudi Arabia and Russia in a dispute over production.
The Saudis had been pushing to cut output to prop up prices but reversed their stance when Russia balked and instead decided to flood the market with hundreds of thousands of additional barrels per day at a steep discount — a move analysts fear may trigger a price war.
The Russians believe cutting production would open the door to more American competition by raising prices and reducing supply, said Mikhail Leontiev, a spokesman for the Russian oil giant Rosneft.
“From the point of view of Russian interests, this deal [to cut production] is simply meaningless,” Leontiev told the Ria Novosti news agency Sunday. “We, yielding our own markets, remove cheap Arab and Russian oil from them to clear a place for expensive American shale. And to ensure the efficiency of its production. Our volumes are simply replaced by the volumes of our competitors. This is masochism.”
The Saudi oil company Aramco is offering discounts of between $6 and $8 for delivery in April, it announced late Saturday. Its shares fell below their original IPO price on Sunday for the first time on the Saudi exchange.
″$20 oil in 2020 is coming,” Ali Khedery, a former U.S. official in Iraq and onetime Middle East expert with Exxon, wrote on Twitter. “Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc. — may prove existential 1-2 punch when paired with COVID19.”
A production-cut agreement could still happen. An advisory-level OPEC meeting is scheduled for later this month, and the Russians have said they are open to further talks.
By Will Englund