Stock selling reaches extremes as investors face a new crisis.
Stocks in the United States were on track for their sharpest daily decline since the financial crisis more than a decade ago, with markets around the world plunging on Monday as oil prices cratered after a clash between the world’s biggest oil producers.
The S&P 500, already down 12 percent from its late February high, fell another 7 percent on Monday. The sudden downdraft meant that trading in the United States was automatically halted early in the day — a rare occurrence meant to prevent stocks from crashing — but it resumed after a 15 minute delay.
The drop on Monday was the worst for stocks in the United States since December 2008, when the country was still reeling from the collapse of Lehman Brothers and the housing crisis that dragged the economy into a recession. The selling in recent weeks has left stock prices roughly where they were last June.
After Saudi Arabia and Russia set off a price war for crude over the weekend, oil lost nearly a quarter of its value in early trading on Monday, the kind of plunge that has not happened in nearly 30 years. That led to a collapse in share prices of companies and businesses that service the oil and gas sector. Manufacturers and banks, which are sensitive to concerns about the economy, also tumbled.
Financial markets have whipped around for weeks as investors struggled to quantify the economic impact of the spreading coronavirus: stocks have tumbled, oil prices cratered, and yields on government bonds reflected a sense among investors that there was worse still to come.
“Markets want to hear that the global economy is open for business, and the problem is, it isn’t easy to say that going forward,” said Patrick Chovanec, chief strategist at the investment advisory firm Silvercrest Asset Management.
In Europe, major stock benchmarks fell more than 7 percent. Shares ended sharply lower in Asia also.
As stocks fell, investors seeking a safe harbor pushed yields on government bonds to new lows. The yield on the closely watched 10-year U.S. Treasury bond, which falls as the price of the bonds rise, dropped below 0.5 percent, about half the level of just a week ago.
Trading was temporarily halted Monday morning. Here’s why.
Five minutes into the trading day in the United States on Monday, the plunge in the S&P 500 hit 7 percent, setting off an automatic 15-minute trading halt known as a circuit breaker.
The next trading halt would come if the S&P 500 falls 13 percent from Friday’s close. Should stocks fall 20 percent, trading would end for the rest of the day.
Circuit breakers were introduced after the October 1987 Black Monday stock market crash as a way to provide time for reflection by temporarily halting the action on hectic days. The circuit breakers were revamped after the May 6, 2010, collapse in stocks that came to be known as the Flash Crash. Monday was the first time the current circuit breakers, which were established in 2013, were set off.
Oil stocks crater following crude’s plunge.
Shares in oil companies fell sharply Monday as the price of crude nose-dived.
Many small oil companies that are responsible for more than 15 percent of American oil production face bankruptcy if the price war between Saudi Arabia and Russia goes on for more than a few weeks, while larger oil companies will be challenged to protect their dividend payments.
In the United States, the 10 worst-performing stocks in the S&P 500 were oil producers. All of them were down more than 30 percent, with shares of companies like Marathon Oil and Apache Corporation down about 40 percent.
Larger oil producers like Exxon Mobil and Chevron fell about 10 percent.
Elsewhere, Saudi Aramco, the national oil company of Saudi Arabia, fell as much as 10 percent, the maximum amount allowed on the Riyadh stock exchange.
Royal Dutch Shell fell as much as 22 percent after trading started in Europe, but then shed about half of those losses, to about 13 percent lower in midmorning trading.
Shares in BP, based in Britain, and France-based Total were lower by about the same amount.
Bank stocks are also falling fast.
Banks are being hit on all fronts Monday. Shares of the biggest lenders are down by more than 10 percent, with JPMorgan falling 15 percent and Bank of America dropping 12 percent.
The selling is explained by several factors:
Tumbling interest rates squeeze banks’ profitability by lowering how much they can charge on loans.
With oil prices falling, smaller American oil companies could have a hard time repaying debt owed to big lenders.
The across-the-board hit to financial markets over the past few weeks means that bank trading desks could wind up reporting large losses. Plus, uncertainty about the economy could hurt the banking business in general as companies delay borrowing and spending.
Clorox and a handful of retail stocks are up.
Not everything is getting clobbered, and the stocks that are rising Monday also have a story to tell.
Among the handful of companies in the S&P 500 to climb on Monday is Clorox, the maker of disinfecting cleaners and wipes. Up almost 1 percent by early afternoon, the stock hit its highest level ever. As consumers have rushed to stock up on cleaning supplies, Clorox’s shares have climbed 15 percent this year.
And a trio of retailers that are inching higher also reflect worry, but in their case it might be about the economy: Dollar General was up more than 1 percent, Dollar Tree was up more than 4 percent and Walmart was up 0.15 percent.
The last time the United States fell into a recession, all three fared well as consumers focused on finding bargains and discounts and turned to retailers known for offering them.
White House invites Wall Street to Washington.
The White House has invited top Wall Street executives to a meeting in Washington on Wednesday, as the coronavirus outbreak continues to wreak havoc on markets and sow economic anxiety, according to an official.
The meeting is expected to involve executives from big banks and senior administration officials, many of whom are scrambling to find ways to contain the economic fallout from the virus. It is not clear yet whether President Trump will attend.
While the meeting is expected to be purely a discussion, it is reminiscent of a similar moment in 2008, when Treasury Secretary Henry Paulson, Federal Reserve Chair Ben S. Bernanke and others summoned bank leaders to Washington and told them they would need to take a total of $125 billion worth of capital injections to shore up confidence in the banking sector.
Trump plays down threat as politicians discuss economic stimulus.
President Trump continued to play down the economic impact from the outbreak, comparing the number of deaths from coronavirus with those from the flu and blaming the fallout on oil prices and the news media.
The comments came as Mr. Trump’s economic advisers were expected to brief him on a menu of potential fiscal stimulus items at the White House on Monday, according to people familiar with the matter. The options are expected to include targeted tax relief and paid sick leave for workers.
A senior Democratic aide said on Monday morning that discussions were starting among House committee chairmen, congressional Democrats and administration officials on what such a package might look like.
A day earlier, Democratic leaders in Congress threw their support behind government-paid sick leave and increased spending on safety net programs.
The bull market for stocks may have finally met its match.
Some of the world’s most important financial markets crossed into, or flirted with, bear market territory on Monday. That could augur an ugly week for those holding the world’s wealth.
Japanese and Australian stocks finished bruising trading days down 20 percent from their recent highs — the technical definition of a bear market, the flip side of the go-go bull market that has inspired memorials to surging capitalism. The drops represent billions of dollars in losses for some of the most valuable companies in both countries.
Stocks in Germany, France and Britain plunged on Monday, putting all three well into bear market territory, and shares in the United States were close.
Bear markets are rare and are sometimes seen as a harbinger of tougher economic times to come. Some notable bear markets in the United States include the one that ushered in the global financial crisis in 2007 and the dot-com bust in 2000.
Here’s what else is happening.
Apple’s iPhone sales in China dropped by about 60 percent to roughly 500,000 last month from a year ago, according to Chinese government data. Overall smartphone sales fell by roughly 56 percent in the country over the period.
Staff members at Vice Media Group were told to work from home on Monday after the company said that an employee in its Brooklyn office “may have been exposed” to the coronavirus.
For the third time in two weeks, the turmoil in the markets took Robinhood, the retail trading application, offline on Monday morning, infuriating customers who were unable to do anything while stocks plunged. Last week, the company said a surge in customer activity overwhelmed its back-end systems.
JetBlue said Monday that it was withdrawing its earnings estimates for the first quarter and 2020 because of “ongoing uncertainty” caused by the coronavirus, which has contributed to a rapid decline in airline bookings.
Reporting and research were contributed by Deborah Solomon, Jim Tankersley, Matt Phillips, Adam Satariano, Jeanna Smialek, Alexandra Stevenson, Jack Ewing, Liz Alderman, Li Yuan, Ben Dooley, Kevin Granville and Carlos Tejada.