The Dow and the S&P 500 Are on the Brink of a Bear Market
By Nicholas Jasinski
Updated March 9, 2020 7:59 pm ET / Original March 9, 2020 3:52 pm ET
4 p.m.:Monday’s market selloff deepened in the afternoon, pushing U.S. indexes to the edge of a bear market, signifying a 20% decline from their recent high-water mark. The Dow Jones Industrial Average closed down 2014 points, or 7.8%, the S&P 500 lost 7.6%, and the Nasdaq Composite fell 7.3%.
Each index was slightly off its lowest levels of the day, but still registered its largest one-day loss since the financial crisis in 2008. The market had lost much of the ground regained in a modest upswing that followed a 15-minute trading halt in the morning.
MORE COVERAGE
These are the levels that would signify a move into bear territory for each index:
• Dow Jones Industrial Average record high (Feb. 12): 29,551.42
• Monday’s close: 23,851.02
• Bear market: Below 23,641.14
• S&P 500 record high (Feb. 19): 3386.15
• Monday’s close: 2746.56
• Bear market: Below 2708.92
• Nasdaq Composite record high (Feb. 19): 9817.18
• Monday’s close: 7950.68
• Bear market: Below 7853.74
Down, Down, DownPerformance since Feb. 19 highsSource: FactSet
%Dow Jones IndustrialAverageNASDAQ CompositeIndexS&P 500 IndexFeb. 22Feb. 26March 3March 9-20-15-10-50NASDAQ Composite IndexxFeb 27, 2020x-12.7%
Investors abandoned stocks and any other risky assets for havens like U.S. government debt, gold, the Japanese yen, and the Swiss franc.
All 11 S&P 500 sectors were down on Monday, led by energy’s 20% tumble. Any stocks considered cyclical were sharply lower: Financials ended down 11%, and industrials and materials were both off over 9%. Defensive stocks—those seen as better able to weather harder times in the economy—were relatively better. Consumer staples closed down 4.4% and health care and utilities both lost slightly over 5%.
Read Next:The Dow Had Its Worst Week Since 2008. Where to Find Cash-Rich Stocks in the Coronavirus Selloff.
The price of Brent crude oil, the main international price benchmark, tumbled 24.1%, to $34.36 a barrel—its lowest level since 2016—after Saudi Arabia deeply cut prices for oil it sells abroad in a bid to win market share from Russia and other producers. West Texas Intermediate, the U.S. benchmark, dropped 24.6%, to $31.13.
A flurry of buying in government bonds sent the yield on the 10-year Treasury below 0.4% on Monday morning. It recovered slightly to 0.499% by the close, still an all-time low close and marking the13th straight day of declining yields. That is the longest streak on record.
Gold prices gained about 0.2%, and the U.S. dollar declined almost 3% versus the yen. The Cboe Volatility Index, or VIX—a measure of market volatility—jumped to its highest level since 2008, to close up 30%, at about 55.
The STOXX Europe 600 Index closed in a bear market Monday, after falling 7.4%. The index is off 21.8% from its Feb. 19 record high. Back in the U.S., the small-cap Russell 2000 index also close in a bear market on Monday, down 9.4%.
That there will be a meaningful negative economic impact from the spreading outbreak is now undeniable. A quarter of Italy’s population is quarantined. Travel, hospitality, and tourism industries are seeing business evaporate. New York has declared a state of emergency and Covid-19 is appearing in more areas across the U.S.—although the pace of testing remains well behind those in other nations. Globally, there are more than 105,000 confirmed cases and nearly 3,600 deaths in over 100 countries.
Closings of factories mean lost manufacturing output and supply-chain disruptions. Demand for products and services suffers when public places such as shopping areas are closed, and when governments limit or discourage travel.
No one can predict how far the virus will spread or how long until it’s under control. Add to that a price war in global oil markets, and the uncertainty is translating into a “sell first, ask questions later” attitude on Wall Street.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com
By Nicholas Jasinski
Updated March 9, 2020 7:59 pm ET / Original March 9, 2020 3:52 pm ET
4 p.m.:Monday’s market selloff deepened in the afternoon, pushing U.S. indexes to the edge of a bear market, signifying a 20% decline from their recent high-water mark. The Dow Jones Industrial Average closed down 2014 points, or 7.8%, the S&P 500 lost 7.6%, and the Nasdaq Composite fell 7.3%.
Each index was slightly off its lowest levels of the day, but still registered its largest one-day loss since the financial crisis in 2008. The market had lost much of the ground regained in a modest upswing that followed a 15-minute trading halt in the morning.
MORE COVERAGE
- How Italy’s Mistakes Could Be Repeated Elsewhere
- What the Government Can Do
- Don’t Expect Russia to Blink on Oil Production
These are the levels that would signify a move into bear territory for each index:
• Dow Jones Industrial Average record high (Feb. 12): 29,551.42
• Monday’s close: 23,851.02
• Bear market: Below 23,641.14
• S&P 500 record high (Feb. 19): 3386.15
• Monday’s close: 2746.56
• Bear market: Below 2708.92
• Nasdaq Composite record high (Feb. 19): 9817.18
• Monday’s close: 7950.68
• Bear market: Below 7853.74
Down, Down, DownPerformance since Feb. 19 highsSource: FactSet
%Dow Jones IndustrialAverageNASDAQ CompositeIndexS&P 500 IndexFeb. 22Feb. 26March 3March 9-20-15-10-50NASDAQ Composite IndexxFeb 27, 2020x-12.7%
Investors abandoned stocks and any other risky assets for havens like U.S. government debt, gold, the Japanese yen, and the Swiss franc.
All 11 S&P 500 sectors were down on Monday, led by energy’s 20% tumble. Any stocks considered cyclical were sharply lower: Financials ended down 11%, and industrials and materials were both off over 9%. Defensive stocks—those seen as better able to weather harder times in the economy—were relatively better. Consumer staples closed down 4.4% and health care and utilities both lost slightly over 5%.
Read Next:The Dow Had Its Worst Week Since 2008. Where to Find Cash-Rich Stocks in the Coronavirus Selloff.
The price of Brent crude oil, the main international price benchmark, tumbled 24.1%, to $34.36 a barrel—its lowest level since 2016—after Saudi Arabia deeply cut prices for oil it sells abroad in a bid to win market share from Russia and other producers. West Texas Intermediate, the U.S. benchmark, dropped 24.6%, to $31.13.
A flurry of buying in government bonds sent the yield on the 10-year Treasury below 0.4% on Monday morning. It recovered slightly to 0.499% by the close, still an all-time low close and marking the13th straight day of declining yields. That is the longest streak on record.
Gold prices gained about 0.2%, and the U.S. dollar declined almost 3% versus the yen. The Cboe Volatility Index, or VIX—a measure of market volatility—jumped to its highest level since 2008, to close up 30%, at about 55.
The STOXX Europe 600 Index closed in a bear market Monday, after falling 7.4%. The index is off 21.8% from its Feb. 19 record high. Back in the U.S., the small-cap Russell 2000 index also close in a bear market on Monday, down 9.4%.
That there will be a meaningful negative economic impact from the spreading outbreak is now undeniable. A quarter of Italy’s population is quarantined. Travel, hospitality, and tourism industries are seeing business evaporate. New York has declared a state of emergency and Covid-19 is appearing in more areas across the U.S.—although the pace of testing remains well behind those in other nations. Globally, there are more than 105,000 confirmed cases and nearly 3,600 deaths in over 100 countries.
Closings of factories mean lost manufacturing output and supply-chain disruptions. Demand for products and services suffers when public places such as shopping areas are closed, and when governments limit or discourage travel.
No one can predict how far the virus will spread or how long until it’s under control. Add to that a price war in global oil markets, and the uncertainty is translating into a “sell first, ask questions later” attitude on Wall Street.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com
