Dow Jones index tumbles 1,191 points, its worst drop in history

Dow Jones index tumbles 1,191 points, its worst drop in history

A trader works on the floor of the New York Stock Exchange shortly before the closing bell as the m
A trader works on the floor of the New York Stock Exchange shortly before the closing bell as the market takes a significant dip in New York, U.S., Feb 25, 2020.  (Photo: REUTERS/Lucas Jackson)

NEW YORK: The Dow industrials posted its largest-ever drop in a single session on Thursday (Feb 27) as Wall Street led stocks across the globe lower, with traders fretting over the economic impact of the spreading coronavirus.

The Dow Jones Industrial Average fell 1,190.95 points, or 4.42 per cent, to 25,766.64 – its worst points drop in history.

Amid the sea of red, 3M was the only gainer due to robust demand for face masks to guard against the virus. Other large companies, including Apple, Boeing, Microsoft and Procter & Gamble lost more than 5 per cent.

On Wall Street, the S&P 500 posted its largest percentage drop since August 2011, losing 137.63 points, or 4.42 per cent, to 2,978.76. The Nasdaq Composite dropped 414.30 points, or 4.61 per cent, to 8,566.48.

Oil prices tumbled to their lowest in more than a year and the benchmark US Treasury yield set a record low below 1.25 per cent.

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No country should make the "fatal mistake" of assuming it will be spared the coronavirus, the World Health Organization said, as governments from Iran to Australia shut schools, cancelled big events and stocked up on medical supplies in a race to contain the rapid global spread.

The worsening threat prompted investors to rapidly step up bets the US Federal Reserve would need to cut interest rates as soon as next month to support economic growth.

"We don't even need to wait for economic data to see how badly the economy is being hit. You can tell that the sales of airlines and hotels are already falling by a half or something like that," said Tomoaki Shishido, senior economist at Nomura Securities.

"It is fair to say the impact of the coronavirus will be clearly much bigger than the US-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month," he said.

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The coronavirus has now spread to 50 countries, with cases confirmed in the last day in the United States and Spain that appeared to be contracted locally.

Maris Ogg of Tower Bridge Advisors said there were still too many unknowns about the scale of the global outbreak and that "we're not going to know the answer for a while, probably at least two to four weeks".

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The market's losses have been exacerbated in the US by the lofty valuations that lifted indices to a series of records only weeks ago.

"It's understandable that not only do you have something to worry about, which we haven't had for a while, but we're also due for a correction," Ogg said.

Markets have been rattled by the prospect that lockdown measures such as those employed in China will become more widespread, denting global growth and producing a "nesting" impulse in the consumer-driven US economy, especially coming at a time when many economies already are fragile.

Goldman Sachs was the latest to issue a warning on Thursday when it slashed its 2020 forecast for US earnings, estimating that it now expects flat earnings in 2020 and lower growth in 2021.

"Our reduced forecasts reflect the severe decline in Chinese economic activity in (the first quarter), lower end-demand for US exporters, supply chain disruption, a slowdown in US economic activity, and elevated uncertainty," Goldman said.

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Source: Agencies

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