The Dow Jones is suffering a grisly meltdown, and not even a historic intervention from the Federal Reserve was enough to stop the stock market’s bleeding.
Barring a last-minute recovery, the Dow could record its worst daily percentage loss since October 1987 – when it fell 22.61% on “Black Monday” and then 8.04% one week later.
As the stock market staggered toward the closing bell, all three of Wall Street’s major indices reported ugly losses.
In the commodity sector, it was a miserable day for any traders looking for safety in the price of gold. The yellow metal dove 4.05% to $1,575.
Given the fact that European travel to the U.S. is set to be suspended, it was unsurprising to see a 5.25% slide in crude oil, but WTI is still holding above $31 per barrel.
Digital asset bitcoin had a miserable day, crashing 23% to $6,069. While it is not clear what would drive this weakness, it seems possible that much like investors in gold, the need for cash could be driving liquidations in BTC/USD.
The Federal Reserve is making a desperate attempt to rescue the flailing stock market. The U.S. central bank announced that it would pump trillions of dollars of liquidity into financial markets over the next few weeks.
In an explanation for this jaw-dropping amount of stimulus, the New York Fed gave the following statement:
These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak.
While this briefly lifted the Dow off its lows, the sharp gains were erased as bulls questioned the Fed’s ability to shield the economy from a demand shock as enormous as the coronavirus.
The European Central Bank meeting appeared to add fuel to the fire as President Christine Lagarde disappointed global markets with the decision not to cut interest rates. If the reaction in Italian bonds was any indication, traders treated this as a policy mistake.
The lack of perceived conviction from ECB President Christine Lagarde that the central bank is willing to do whatever it takes to help euro asset markets. The remarks “we are not here to close spreads” do risk re-introducing a risk/credit premium into EUR assets and are reminiscent of pouring oil into the fire.
The lack of coordination between the United States and Europe has never been more evident. The ECB has effectively left the Federal Reserve high and dry.
This is unsurprising after four years of a protectionist Trump administration. But the president’s admission that he did not have time to contact European leaders (outside of the U.K.) before unveiling his new travel ban was deeply alarming for a Dow Jones that still correlates strongly with global risk appetite.
It was another awful day in the Dow 30 as risk-appetite took an astonishing blow.
Caterpillar, a global bellwether for growth, was down an eye-watering 8.9% as the coronavirus pandemic shuts down economic activity around the world.
Other huge names suffering were Nike – which lost 11.5% because its sales outlook is evaporating – and Disney, which was down 11.7% due to disruptions to its live parks and performances.
The drop in crude is devastating oil companies, and Chevron and Exxon Mobil were hammered to the tune of roughly 9.5% each.
Apple lost 5% one day after it closed all of its stores in Italy. AAPL now trades under the $260 handle.