The Dow Jones cratered nearly 900 points on Tuesday, bringing its losses to nearly 2,000 points after an ugly crash on Monday. Another devastating drop in the S&P 500 marked the first time it had crashed more than 3% in back-to-back sessions since the financial crisis in 2008.
The alarming spread of the global coronavirus outbreak was the sole catalyst. Dow bulls can’t tout the U.S. an investment haven anymore because the CDC warned the spread of the disease is inevitable in North America.
All three of the major U.S. stock market indices were under serious pressure as the closing bell prepared to finally bring a merciful end to the second day of Wall Street’s bloodbath.
In the commodity sector, crude oil (-3.2%) suffered another unsurprising collapse. It was far more unexpected to see the price of gold under severe pressure, diving 2.4% as the perceived safe-haven struggled despite strong gains in recent weeks.
The haven bid saw the Japanese yen surge. The 10-year U.S. Treasury bond yield hit an all-time low.
Consumer confidence came in well below forecasts but is still in decent shape at 130.7. Dow bulls shrugged this off, anticipating the future impact on U.S. consumers as fear of the coronavirus spreads.
The situation in Europe has worsened significantly, with the outbreak accelerating in northern Italy.
In the Middle East, Iran remains a significant concern. Though just 95 infections have been reported, its death total is already the largest outside China.
In the U.S., the Centers for Disease Control and Prevention hiked its travel alert for South Korea to its highest level.
Health officials believe it is inevitable the coronavirus takes hold in the United States, as CDC official Nancy Messonier stated:
Ultimately we expect we will see community spread in the United States. It’s not a question of if this will happen but when this will happen and how many people in this country will have severe illnesses.
Health Secretary Alex Azar spoke to U.S. lawmakers on Tuesday, raising significant concerns that the U.S. does not have the necessary stockpiles of medical items it needs to weather an epidemic.
Pushing back against this storyline, the Trump administration has repeatedly urged investors to buy the dip in the Dow Jones.
Larry Kudlow went on CNBC to state the following,
We have contained this, I won’t say airtight but pretty close to airtight. [If you’re a long-term investor] I would suggest taking a look — a very serious look — at a stock market that is a lot cheaper than it was a week ago.
The Dow completely ignored him, as the sell-off pushed beyond a 2% loss for the first time shortly after his remarks.
Investors clearly viewed it as rather a desperate attempt to bolster stock market confidence. Why else would he directly contradict official government warnings?
Another brutal day for the Dow 30 was made even worse as one of the index’s core stocks – Boeing – took a 4.3% hit.
Another of the Dow Jones’ biggest stocks, Apple, struggled to a 3.4% loss.
American Express was the worst-performing company, off more than 5.7%, while UnitedHealth shed 5.2%.
Even Home Depot failed to maintain its post-earnings rally. HD stock ended the session down around 1%.
Last modified: February 25, 2020 9:23 PM UTC