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Portfolio > ETFs > Broad Market

Dow Plunges Into Bear Territory, S&P 500 Barely Misses

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The bear has arrived for the Dow.

With a drop of 5.9%, or 1,465 points, to close at 23,553.22, on Wednesday, the Dow Jones Industrial Average is down more than 20% from its all-time closing high on Feb. 12., which officially ended the 11-year bull market.

The S&P 500 fell 4.89% to close at 2,741.38  off about 19% from its recent high. The Nasdaq ended the day down 4.70%, to close at 7,952.05.

“Brutal session for US #stocks with the three major indices ending the day 4.7 to 5.9% lower. Government #bonds, the traditional risk mitigator and diversifier, did not provide relief. The yield on the 10-year ended the day higher (at 0.85%). A bunch of margin calls are going out,” said Mohamed A. El-Erian, chief economic advisor for Allianz, late Wednesday on Twitter.

“It happened in just 19 days. Officially the fastest bear market ever,” Tweeted Michael Batnick, director of research for Ritholtz Wealth Management, who shared a Dow chart on other bear markets illustrating the development.

The markets have weakened out of growing concern that federal action at the fiscal level and other steps may not be enough to limit the economic effects of the spreading coronavirus.

“The S&P 500 finished -4.89%, the 7th close of at least +/- 3% in last 10 trading sessions. In post-WW2 era, it happened in 2008 and 1987. Historic volatility. Further, today marked 6 closes of at least +/- 4% in 10 sessions, something only seen in 2008, 1987, 1933, 1932, 1929,” explained TD Ameritrade Institutional’s Michael McKerr in a Tweet.

President Trump is set to address the nation at 9 p.m. EDT on Wednesday, several hours after the World Health Organization said the virus has reached pandemic levels. According to Johns Hopkins University, confirmed cases now top 121,560, with more than 4,370 people having died from the virus.

Charles Schwab Chief Investment Strategist Liz Ann Sonders said on Twitter: “# of cases of #coronavirus growing exponentially in U.S.; since February 20 cases have been doubling every 3 days; if testing continues as promised, # of cases in U.S. could reach almost 25k by March 21 @biancoresearch, @Johns Hopkins.

“There is rarely such a *perfect* example of why “those who fail to study the past are doomed to repeat it”,” said finance history blogger Jamie Catherwood on Twitter, referring to an image of a parade after World War I in Philadelphia which contributed to the spread of the Spanish Flu.

Future Shock

“We have no idea when the coronavirus, the spread, is going to subside. That uncertainty is going to continue to create a lot of volatility,” David Spika, the president of GuideStone Capital Management, told Bloomberg. “We have no idea how to model it, we have no idea what to expect from it.”

According to research reports and early survey responses from six financial firms compiled by Bloomberg News, the U.S. economy could contract at an annualized rate of 0.1% to 2% in the second quarter.

“Given the extreme market volatility and growing number of cases of the virus in the U.S., we’re seeing states declaring states of emergency,” BMO economist Jennifer Lee told the news service Wednesday. “It’s becoming a demand issue   all these fearful consumers, people canceling cruises. It’s going to feed back to the business side as well, with business investment holding back.”

As campuses from coast to coast, such as UCLA and and the University of Virginia move to online-only classes, the NCAA says its March basketball tournament will be played without fans. New York has postponed its St. Patrick’s Day Parade this year, while cities like Chicago and Boston have cancelled theirs. 


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