Wednesday's Stock Market Close: US Equities Plunge As WHO Declares Coronavirus A Pandemic

U.S. stocks plunged on Wednesday as investors doubted the timing and efficacy of possible fiscal stimulus package to limit the financial impact of the coronavirus outbreak, while the World Health Organization declared the virus a pandemic.

The Dow Jones Industrial Average dropped 1,464.63 points to 23,553.53 while the S&P 500 fell 140.84 points to 2,741.39 and the Nasdaq Composite Index tumbled 392.2 points to 7,952.05.

The Dow and S&P just avoided officially entering bear market territory based on market close at the recent highs from Feb. 19.

Nonetheless, the Dow the second-biggest daily drop in its history.

Volume on the New York Stock Exchange totaled 6.43 billion shares with 153 issues advancing, six setting new highs, and 2,874 declining, with 1,126 setting new lows.

Active movers were led by Bank of America (BAC), Advanced Micro Devices Inc. (AMD) and Aytu BioScience Inc. (AYTU).

The World Health Organization declared the coronavirus outbreak a global pandemic

“We can see the panic in the equity market,” said Jerry Braakman, chief investment officer of First American Trust. “The big question for most people is, are we at the bottom yet? I think we’re only about halfway there.”

On Tuesday President Donald Trump reportedly suggested an elimination of the payroll tax rate through the end of the year when meeting with Senate Republicans as a way to alleviate the financial impact of the coronavirus. However, it’s unclear when or if such policies will be implemented.

“Markets seem disappointed that the White House did not release details of its fiscal response to the coronavirus,” said Brian Gardner, a Washington policy analyst at KBW. “We are still in early days and policymakers are continuing to grapple with different options and negotiate between the two parties and between Congress and the administration.”

“We need to see meaningful support for economic activity and credit backstops especially for small businesses, not a targeted approach executed only by the executive branch,” said Joe Kalish, chief global macro strategist at Ned Davis Research, said in a note. “We will likely need congressional involvement. This is a potential solvency problem.”

Johns Hopkins University reported that the number of coronavirus cases in the U.S. has surpassed 1,000. Italy has now more than 10,00 confirmed cases of the virus with 631 deaths.

On Wednesday, the Bank of England cut its benchmark rate by 50 basis points to 0.25% -- the lowest level in history -- one week after the Federal Reserve reduced its benchmark rate.

European Central Bank President Christine Lagarde warned that coronavirus could lead to an economic shock like the 2008 financial crisis unless European leaders act quickly – suggesting ECB may also cut rates on Thursday.

In the U.S., the Labor Department said Wednesday that the consumer price index edged up 0.1% in February, equaling its January increase.

“Despite the hopes for fiscal stimulus everywhere, we see significant downside risks,” said Guillaume Tresca, a strategist at Credit Agricole SA in Paris. “As long as uncertainties remain on the number of cases, and central banks’ actions and fiscal stimulus plans are not lifted, we see few reasons for a protracted and long-term rebound.”

Overnight in Asia, markets closed lower. China’s Shanghai Composite tumbled 0.94%, while Hong Kong’s Hang Seng fell 0.63%, and Japan’s Nikkei-225 dropped 2.27%.

In Europe markets finished lower as Britain’s FTSE-100 fell 1.38%, France’s CAC-40 gained 0.35% and Germany’s DAX dropped 0.38%.

Crude oil futures plunged 3.9% at $33.02 per barrel, Brent crude gained 0.61% at $36.01. Gold futures dropped 1.4%.

The euro slipped 0.05% at $1.1277 while the pound sterling fell 0.72% at $1.2816.

The yield on the 10-year Treasury gained 9.63% to 0.82% while yield on the 30-year Treasury jumped 7.3% to 1.308%.