10-year Treasury drops below 0.5%; S&P 500 nears bear market
Crude prices in freefall after Saudi Arabia starts price war
U.S. stocks extended losses back past 7%, as a full-blown oil price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, crude sank more than 30% and credit markets buckled.
The S&P 500 sank the most since the May 2010 flash crash and is now down 18% from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day. The index plunged 7% four minutes into the session, triggering NYSE circuit breakers that halted trading for 15 minutes. The next circuit breaker will trip if losses reach 13%. The Dow Jones Industrial Average lost more than 8%, or 2,091 points.
The oil-price crash, if sustained, would upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home. Italy over the weekend effectively put its industrial heartland in the north of the country on lockdown in an attempt to halt the spread of the illness.
“The market was poised and vulnerable to this volatility and crude oil has just exacerbated it,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. “The coronavirus itself has been the main cause of the correction, but now it’s being exaggerated even further.”
Equities and haven assets showed little immediate reaction to news that President Donald Trump’s administration is drafting measures to blunt the economic fallout from the virus, including a temporary expansion of paid sick leave and possible help for companies facing disruption from the outbreak. A Bloomberg gauge of financial stress for the U.S. has deteriorated at the fastest pace since the great financial crisis.
“When there’s panic, there tends not to be accurate pricing of assets,” Kristina Hooper, Invesco’s chief global market strategist, said in an interview at Bloomberg’s New York headquarters. “The sell-off today to me is emblematic of that. It really is a knee-jerk reaction to what’s happened over the weekend.”
Bloomberg - By Claire Ballentine and Vildana Hajric March 8, 2020, 1:38 PM PDT Updated on March 9, 2020, 11:07 AM PDT