Wall Street has worst week since 2008 as S&P 500 drops 11.5pc

AP – Stocks sank around the globe again on Friday as investors braced for more economic pain from the coronavirus outbreak, sending United States (US) markets to their worst weekly finish since the 2008 financial crisis.

The damage from the week of relentless selling was eye-popping: The Dow Jones Industrial Average fell 3,583 points, or 12.4 per cent. Microsoft and Apple, the two most valuable companies in the S&P 500, lost a combined USD300 billion. In a sign of the severity of the concern about the possible economic blow, the price of oil sank 16 per cent.

The market’s losses moderated on Friday after the Federal Reserve released a statement saying it stood ready to help the economy if needed. Investors increasingly expect the Fed to cut rates at its next policy meeting in mid-March.

The Dow swung back from an early slide of more than 1,000 points to close around 350 points lower. The S&P 500 fell 0.8 per cent and is now down 13 per cent since hitting a record high just 10 days ago. The Nasdaq reversed an early decline to finish flat.

Global financial markets have been rattled by the virus outbreak that has been shutting down industrial centres, emptying shops and severely crimping travel all over the world. More companies are warning investors that their finances will take a hit because of disruptions to supply chains and sales. Governments are taking increasingly drastic measures as they scramble to contain the virus.

The rout has knocked every major index into what market watchers call a “correction,” or a fall of 10 per cent or more from a peak. The last time that occurred was in late 2018, as a tariff war with China was escalating. Market watchers have said for months that stocks were overpriced and long overdue for another pullback.

Bond prices soared again as investors sought safety and became more pessimistic about the economy’s prospects. That pushed yields to more record lows. The yield on the 10-year Treasury note fell sharply, to 1.14 per cent from 1.30 per cent late Thursday. That’s a record low, according to TradeWeb. That yield is a benchmark for home mortgages and many other kinds of loans. Crude oil prices sank 4.9 per cent over worries that global travel and shipping will be severely crimped and hurt demand for energy. “All this says to us is that there are still a lot of worries in the market,” said Gene Goldman, chief investment officer at Cetera Financial Group. “We need the Fed to come out and say basically guys, we got your back.”

Traders have been growing more certain that the Federal Reserve will be forced to cut interest rates to protect the economy, and soon. Goldman said the Fed’s current lack of action amounts to a tightening of rates compared with other nations and their actions to offset the impact of the coronavirus.

A specialist works on the floor of the New York Stock Exchange. PHOTO: AP