Coronavirus: Dow enters bear market territory as virus continues to scare investors
Investors are spooked by the prospect of global economic disruption because of likely restrictions on consumers and businesses.
Wednesday 11 March 2020 23:05, UK
The Dow Jones Industrial Average has entered bear market territory after a volatile day of trading in the US.
The market index confirmed a bear market for the first time since the 2008-09 financial crisis, after finishing more than 20% below its 12 February record close.
It came after the World Health Organization declared that the coronavirus was now being treated as a pandemic.
On Tuesday, US markets had surged on US President Donald Trump's promises of aid to help business through the outbreak, the Dow Jones soaring by more than 1,100 points.
But on Wednesday, they gave up most of their gains as investors realised no details had been forthcoming, sending the index into reverse, falling more than 1,400 points or 5.86%.
The Nasdaq was down 4.4% and the S&P 500, which set a record high just three weeks ago, was down by 4.6%.
In the past three weeks the Dow Jones has had six days where it has swung by more than 1,000 points, not including Wednesday, something it has done only three other times in history.
JJ Kinahan, chief market strategist at TD Ameritrade, said the expectation was for "a month of volatility as the coronavirus plays out".
Mr Trump had hinted at tax cuts and other economic relief but his proposal for a cut to payroll taxes has not been welcomed in Congress.
He tweeted on Wednesday: "I am fully prepared to use the full power of the Federal Government to deal with our current challenge of the coronavirus!" But, again, there were no details.
Louis Wong, of Philip Capital Management, warned: "Investors are still worried that those fiscal stimulus packages may not be able to contain the virus outbreak as well as to mitigate the impact on the economy."
In the UK, the FTSE 100 closed down after a volatile day where it swung between positive and negative territory.
The FTSE had risen 2% in the morning on news of the Bank of England's emergency rate cut from 0.75% to 0.25%, coming after a similar move by the US Federal Reserve last week. The European Central Bank is expected to follow on Thursday.
But Chancellor Rishi Sunak's first budget, which included poor growth figures for the UK economy, sent the FTSE 100 downwards. It finished 1.4% in the red with the FTSE 250 down 1.18%.
The falls in global markets are mainly due to fears that coronavirus could take a sizeable toll on the world economy.
The outbreak began in the world's second-largest economy of China late last year.
Many millions of people were placed under severe travel restrictions, with the initial pain felt by travel and leisure stocks, and luxury stocks, which rely heavily on Chinese consumers.
The fear is that the virus could hurt the global economy from two ends - on the supply side as factories shut down and businesses struggle to continue because workers are quarantined; and on the demand side, where companies will see fewer customers because they are staying at home rather than risking the crowds out shopping or at restaurants.
COVID-19, the illness caused by the coronavirus, has steadily spread to most countries in the world - the UK has 460 cases and the world's largest economy, the US, has confirmed more than 1,000 cases.
Worldwide, there are more than 121,000 cases and 4,300 deaths.