The Dow Jones plunged around 3% on Friday after a surprise statement from Jerome Powell failed to calm a nervous stock market.
The Dow Jones tumbled toward another ugly loss on Friday, even after a surprise message from Jerome Powell raised hopes that the Federal Reserve will intervene to support a fragile stock market.
Powell’s comments sparked a brief relief rally, but the Fed chair’s statement failed to calm a market rocked by coronavirus-related commentary from the World Health Organization (WHO).
Among the major U.S. stock market indices, the Dow Jones was easily the worst performer.
In the commodity sector, fears over global demand conjured a horrific day for crude oil, which fell 4.5% to just under $45.
The price of gold suffered an awful 3.5% drop. Silver’s 6.3% pullback was even uglier.
Robust consumer sentiment data did little for markets, as the VIX ballooned to its highest level since 2011.
Fed Chair Jerome Powell clearly heard Wall Street crying out for intervention, and he issued a surprise statement:
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.
It was no surprise to see the Dow Jones struggling after the WHO decided to raise their threat level around the coronavirus outbreak.
While this did cause some market volatility, the most bearish development came from a stunning admission about why the WHO has failed to declare COVID-19 a “pandemic.”
Speaking on Friday, WHO Health Emergencies Programme Executive Director Dr. Michael Ryan suggested that the outbreak had already reached “pandemic” proportions. So why not call it a pandemic? Because it’s “unhelpful to do that.”
If this was influenza, we would probably have called this a pandemic by now, but what we’ve seen with this virus is that [containment measures work] and to declare a pandemic it’s unhelpful to do that when you’re still trying to contain a disease.
The obvious implication of this is that tactical, not technical considerations, are the only reasons the WHO hasn’t designated the coronavirus a pandemic.
Further weighing on stock markets is the realization that a viable vaccine could be as far as 24 months away.
Fridays have been rough on markets since the outbreak began, as investors have been keen to avoid carrying risk over the weekend. This appeared to be the case today, but with an added twist: China reports its crucial PMI data just after the close.
It was a bloodbath in the Dow 30 as huge members of the index dove together.
Boeing (NYSE: BA) is being ravaged by the outlook for struggling airlines. Its stock fell a whopping 5.5% to $271 a share.
Apple (NASDAQ: AAPL) was also in trouble, down another 1.8%. The $1 trillion stock is clinging to year-to-date gains of slightly more than 10%.
J.P. Morgan Chase suffered (-6.4%) from the collapse in Treasury yields, while McDonald’s plummeted 4.6% on a negative outlook for consumer demand if the virus spreads.
Last modified: September 23, 2020 1:37 PM