Traders work and watch president Donald Trump speak on television on the floor at the New York Stock Exchange on March 18, 2020 in New York. (Photo by Bryan R. Smith / AFP) (Photo by BRYAN R. SMITH/AFP via Getty Images)
By Stan Choe
Stock trading has been halted for the fourth time this month Wednesday as S&P 500 drops 7%. Trading will resume in 15 minutes. The automatic circuit-breaker was triggered around 1 p.m. Eastern time as President Donald Trump and other officials were updating reporters on measures to combat the coronavirus. Markets have been highly volatile in recent weeks as the outbreak seems increasingly likely to cause a global recession. The price of crude oil dropped another 18% as traders anticipate a sharp pullback in demand for energy. Even prices for longer-term U.S. Treasurys fell as investors sold what they could to raise cash.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story is below:
U.S. stocks sank close to 6% in midday trading Wednesday, part of another worldwide sell-off, and wiped out the big gains and optimism that Washington had sparked the prior day with promises for massive aid for the economy.
Markets have been incredibly volatile for weeks as Wall Street and the White House acknowledge an increasing risk of a recession due to the coronavirus outbreak. The typical day this month has seen the stock market swing up or down by 4.9%. Over the last decade, it was just 0.4%.
The selling pressure swept markets around the world. Benchmark U.S. oil fell 14% after dropped below $25 per barrel for the first time since 2002. European stock indexes lost more than 4% following broad losses in Asia. Even prices for longer-term U.S. Treasurys, which are seen as some of the safest possible investments, fell as investors sold what they could to raise cash.
The S&P 500, which dictates how 401(k) accounts perform much more than the Dow, is down nearly 30% from its record set last month.
It was just a day ago that the S&P 500 surged 6% after President Donald Trump said he’s “going big” in plans to aid an economy that’s increasingly shutting down by the day. The program could approach $1 trillion, and it would follow a spate of emergency actions by the Federal Reserve and other central banks to get financial markets running more smoothly.
Despite all that, investors are struggling with how much to pay for anything — stocks, bonds, oil — when it’s so uncertain how badly the economy is getting hit, how much profit companies will make and how many companies may go into bankruptcy due to a cash crunch.
“These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,” Deutsche Bank economists wrote in a report Wednesday.
With all the uncertainty and early evidence that China’s economy was hit much harder by the virus than earlier thought, they now see “a severe global recession occurring in the first half of 2020.”
But they also are still forecasting a relatively quick rebound, with activity beginning to bounce back in the second half of this year in part because of all the aid promised from central banks and governments.
Investors say they need to see the number of infections slow before markets can find a bottom. The number of new cases reported in China, where the virus emerged in December, is declining but infections in the United States, Europe and elsewhere are increasing.
The number of infections has topped 200,000 worldwide, and the virus has killed more than 8,000.
For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems, and recovery could take six weeks in such cases.
The Dow Jones Industrial Average was down 1,280 points, or 6%, as of 11:38 a.m. Eastern time. after being down as many as 1,365 shortly after trading began. If stays there, it would be the eighth straight day the Dow has moved by that much.
All the uncertainty has pushed many people toward safety. Last month, investors pulled $17.5 billion out of stock mutual funds and exchange-traded funds, even though stocks set all-time highs in the middle of the month. Money-market funds, meanwhile, drew $25.5 billion, according to Morningstar.
That was all before the market's sell-off accelerated this month, as broad swaths of the economy shut down in hopes of better containing the outbreak. Restaurants have closed to dine-in customers, planes are parked and sports arenas have been dimmed. Goldman Sachs strategists describe this month as “March Sadness.”
President Joe Biden named Jerome Powell, initially appointed by President Trump, to keep his seat as the chair of the Federal Reserve on Monday amid the ongoing challenges of the pandemic, inflation, and unemployment. David Beckworth, a former international economist for the Treasury Department and a senior fellow with the Mercatus Center, joined Cheddar to discuss what he sees as the practicality of Biden's decision. "What Powell brings to the table is he's built up political capital with Republicans and Democrats," he said. "It's easy for him to get the job done. I think in one way he was the path of least resistance for the president."
As housing prices continues to rise, Tim Rood, managing director at the real estate finance solutions company SitusAMC, joined Cheddar's "Closing Bell" to talk about what is driving up the costs, attributing it to supply chain constraints and regulatory expenses. Rood stated that the federal government's response to the 2008 financial crisis has added to the growing price tags. "The government came down super hard on banks and independent mortgage companies because of the defaults," he said.
Colleen Kelly, CEO of Concern Worldwide US, joined Cheddar to discuss food insecurity concerns as the cost of this year's Thanksgiving dinner has surged amid record inflation. Kelly also talked about the ongoing issues derailing global supply chains and raising food prices, which undercuts efforts to tackle food insecurity in the United States and around the world. "Everything that hits the U.S. hits countries that are in extreme poverty even harder, and as you can imagine there were three major things affecting this in the last year: climate change, COVID, and conflict," she said.
Papa Johns has a new look for its logo, graphics, and storefronts. CEO Rob Lynch joined Cheddar's "Closing Bell" to talk about the timing of the rebrand following its ongoing success through the pandemic. Patrons entering revamped locations will notice a lack of menu boards thanks to customer smartphone use and glass panels to allow customers to watch pizzas being made by hand. "Everyone has a menu board in their pocket in the form of their phone," Lynch said. "Eighty percent of our business is ordered digitally, whether it's web-based or our fastest-growing channel being app-based."
In a surprise turn of events, Elizabeth Holmes took the stand in her own defense on Friday and is expected to continue her testimony later today. Holmes, who founded a blood testing start-up Theranos back in 2003, faces 11 counts of wire fraud as well as conspiracy to commit wire fraud. Aron Solomon, Chief Legal Analyst, Esquire Digital joined Cheddar's Opening Bell to discuss.
NFL Hall of Famer Jerry Rice and his daughter/business partner Jaqui Rice Gold joined Cheddar's "Between Bells" to talk about their energy drink G.O.A.T. Fuel. The pair talked about launching the brand during the height of the pandemic and what makes it different from competing brands. "The thing that separates us from the other energy drinks is we have cordyceps mushrooms in the drink," he said. "You're not going to have the jitters or anything like that." The duo also discussed the Los Angeles Lakers making it the official energy drink of its organization and what that means for the growth of the brand.
Rapper and singer T-Pain is teaming up with Google this holiday season to encourage shoppers to support Black-owned businesses on Black Friday. Stephanie Horton, the director of marketing for Google Shopping, joined Cheddar to provide some details about T-Pain's new song, featuring Normani, in a new shoppable interactive film for the promotion. She also explained how Google worked with local artists in various states to create shoppable murals, where products seen in the artwork are discoverable online by simply pointing your camera at it.
Caleb Silver, the Editor-in-Chief for Investopedia, joined Wake Up With Cheddar to break down the latest in the Activision Blizzard sexual misconduct scandal. After 1,700 of the embattled video game maker's employees signed a petition demanding CEO Bobby Kotick step down, Kotick reportedly said he would step down if he can't turn the toxic workplace culture around quickly. Silver noted that the allegations go back years with settlements and lawsuits that indicate Kotick would have to be claiming ignorance of his own business or deliberately obfuscating his knowledge of what happened under his watch.
An Apple memo is apparently encouraging its employees to feel comfortable to freely discuss workplace concerns like wages and paid time off following allegations that employees were fired for communicating about issues of pay, workplace safety, and harassment.
