Dow Jones Crashes So Hard They Might Close the Stock Market
Bond yields have collapsed. Oil prices have crashed. Central banks are clueless. Coronavirus fears continue to grow. It's been that kind of day. | Source: REUTERS/Brendan McDermid
- U.S. stock market trading was temporarily halted after a 7% fall triggered a “circuit breaker.”
- If the brutal selling in the Dow and broader market continues, trading may be briefly halted again after a 13% drop.
- If the market falls 20%, all trading will be closed for the rest of the day.
Trading on the U.S. stock market was halted on Monday as the Dow Jones Industrial Average (DJIA) plunged nearly 2,000 points following the opening bell. The stock market continued to suffer a disastrous session even after its first “circuit breaker” was triggered.
Circuit breakers also kicked in overnight to stem the bleeding in the futures market as coronavirus panic continues to grip Wall Street.
These things are all designed to stop a market panic and cause a bit of a pause in trading – Shane Oliver, head of investment strategy, AMP Capital Investors.
Investors are now eying the crucial levels at which stock trading will be suspended, or closed entirely, on Monday.
Dow and S&P 500 Plunge so Hard Stock Market Trading Halts
A cocktail of negative factors conspired to send the Dow Jones crashing steep into the red on Monday. Coronavirus panic combined with a 30% collapse in the oil price sent investors rushing for safety.
As of 1:40 pm ET, the Dow had nosedived by 1,857.97 points or 7.18% to plunge all the way to 24,006.81.
The Nasdaq wasn’t hit quite as hard, but it still fell 6.13% to 8,049.61.
The S&P 500’s 7% opening bell drop triggered the stock market’s first “circuit breaker.” At last check, the large-cap index was down 6.86% at 27,68.58.
Stock market poised for brutal selloff
Although circuit breakers are designed to calm the nerves, it may have the opposite effect. As Shane Oliver at AMP explains:
It can have the perverse effect of increasing the downward pressure on other markets, particularly until the U.S. market opens.
The last time circuit breakers kicked in on the U.S. futures market was November 8th, 2016, the night Donald Trump won the presidential election. In that instance, buyers swept in at the open and pushed the market higher.
Here’s why that didn’t happen this time:
This time round things might be different and the market is behaving like a recession is due to happen – Margaret Yang, CMC Markets.
When will stock market circuit breakers halt trading today?
Futures trading is halted after a 5% drop, but the Dow Jones, S&P 500, and Nasdaq have a little more leeway during the main session. Here are the S&P 500 levels to watch before trading is halted or cancelled today.
Level One (7% drop) – a 15 minute pause.Triggered at 9:35 am ET.- Level Two (13% drop) – a further 15 minute pause.
- Level Three (20% drop) – Trading is closed for the day.
It should be noted that circuit breakers only kick in before 3:25 pm ET. If the selloff hits these levels after that time, there is no safety net.
First 90 Minutes were make-or-break for Dow Jones
Analysts said that the first 90 minutes would likely determine the direction of today’s session. And that appears to have been correct. We didn’t see buyers sweep in early, and the bloodbath looks set to persist on through the closing bell.
Michael O’Rourke at JonesTrading explains:
Most of these down opens have seen dip buyers come in — we should know in the first 90 minutes of trading… If we don’t bounce quickly in those first 90 minutes, it sets up to be a long and likely ugly day.
And Warren Buffett’s favorite market indicator suggests the selloff isn’t over yet.
Coronavirus panic sets in
The selloff in U.S. stocks is mirrored in Europe where the UK’s FTSE 100 saw its biggest intraday drop since the 2008 crash . Closing at a 7.69% discount, it’s back to three-year lows.
And the Stoxx 600 – a pan-European index – closed the session in bear market territory.
COVID-19 cases in the U.S. climbed to at least 600 as the virus spread to Washington D.C. At least two Congressmen, including former presidential candidate Ted Cruz , have self-isolated after coming into contact with a COVID-19 carrier.
In an emergency decree, Italy locked down a region of 16 million people in an effort to contain the coronavirus outbreak.
We are facing a national emergency… We have to limit the spread of the virus and prevent our hospitals from being overwhelmed – Prime Minister Giuseppe Conte.
Thankfully, China appears to have contained the worst of the outbreak with new cases slowing down.
Oil price collapses overnight
Throwing fuel on the fire, Saudi Arabia collapsed the oil price by as much as 30% on Sunday. The world’s largest oil exporter slashed prices and hinted at rapid supply increase, kickstarting a new price war.
WTI crude last traded at $32.79 for a daily decline of nearly 21%. Brent crude slid to $36.01.
Elsewhere, $26 billion was wiped off the cryptocurrency market with bitcoin slumping back below $8,000 . The 10-year Treasury yield collapsed to a record low of 0.3469% as the flight to safety continues.
