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US Stocks Fall 12%
US Stocks Fall 12%
US Stocks Fall 12%
The S&P 500 index of US stocks fell 12 per cent on Monday, a day after an
emergency rate cut by the Federal Reserve, as the US and other countries around
the world imposed stricter curbs on public activity.
The S&P 500, the benchmark for the US equity market, lurched lower in the
final minutes of trading, eclipsing the worst performance of the pandemic and
marking the biggest single-day loss since the crash of October 1987. The tech-
heavy Nasdaq Composite had its worst day ever, down 12.3 per cent. The Cboe
Volatility index, the market’s “fear gauge”, jumped to a record high.
“The Fed has thrown everything at this. If we are now facing the end of
central bank action, it means we are on our own,” said Seema Shah, chief
strategist at Principal Global Investors. “There is a fear settling in the market;
investors are terrified that this was all that was left.”
DoubleLine Capital
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Shortly before the market close, President Donald Trump urged people in
the US against discretionary travel and gathering in groups of 10 or more. Some
US authorities went further: San Francisco told people to stay at home except for
essential activities and New Jersey imposed a recommended curfew between
8pm and 5am.
Also on Monday, France said people would be allowed to leave their homes
only for essential trips and Canada closed its borders to most foreigners.
Joachim Fels, global economic adviser to Pimco, the asset manager, said
markets were concerned about “what currently looks like an inevitable
recession . . . turning into a depression, and financial markets [going] from a
drawdown to a meltdown”.
In Europe, the UK’s FTSE 100 tumbled 4.7 per cent to its lowest level since
2011 — its year-to-date losses have now spiralled to more than 30 per cent —
and the Stoxx Europe 600 index fell 4.9 per cent.
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Airline stocks were especially hard hit as carriers grounded most of their
fleets and took steps to conserve cash. British Airways parent IAG tumbled 27 per
cent in the UK, while US carrier United Airlines was off 15 per cent. Shares in
banks also came under intense pressure: Capital One, a leading US credit card
issuer, was down 24 per cent; Citigroup fell 19 per cent.
“There is forced selling all over the place,” said Jeffrey Gundlach, chief
executive at DoubleLine Capital, blaming investor redemptions and margin calls.
“The Fed is not buying stocks or junk bonds and that is where you are seeing
massive pressure.”
The Fed on Sunday cut US interest rates by a full percentage point to zero
and announced emergency measures including the purchase of $700bn of US
Treasuries and mortgage bonds.
https://www.ft.com/content/82c5c2ca-670e-11ea-800d-da70cff6e4d3