Updated March 17, 2020 03:39:57

Photo: Traders on the floor of the New York Stock Exchange as stocks take another heavy hit. (AP: Craig Ruttle)

Stocks lost more than 6 per cent on Wall Street on Monday as huge swaths of the US economy come closer to shutting down due to the coronavirus outbreak, from airlines to restaurants.

Emergency actions taken by the Federal Reserve late on Sunday to prop up the economy and get financial markets running smoothly again may have raised fears even further, some investors said.

The selling began immediately on Wall Street at Monday's open, and losses were initially sharp enough to trigger a temporary trading halt for the third time in the past two weeks.

The losses had been even steeper earlier in the morning — down over 9 per cent — and they spread around the world.

European stocks and crude oil were down 5 per cent or more.

The world's brightest spot may have been Japan, where the central bank announced more stimulus for the economy, and stocks still lost 2.5 per cent.

The spreading coronavirus is causing businesses around the world to shut their doors. That has economists slashing their expectations for upcoming months, and JPMorgan Chase says the US economy may shrink at a 2 per cent annual rate this quarter and 3 per cent in the April-through-June quarter.

To many investors, that meets the definition of a recession, and the question is how long it will last.

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Strategists at Goldman Sachs say the S&P 500 could drop as low as 2,000 in the middle of the year, which would be a 41 per cent drop from its record set just a month ago. Goldman expects the index would rally back to 3,200 at year end.

American Airlines and United Airlines both announced steep cutbacks to flights over the weekend as customers cancel trips and the US government restricts travel.

Other travel companies have also seen steep drops in demand from customers. Restaurants, movie theatres and other businesses that depend on drawing crowds appear to be next.

The Federal Reserve has been trying to do what it can to help the economy, and over the weekend it slashed short-term interest rates back to their record low of nearly zero.

Photo: The Fed hoped that cutting rates would ease fears on Wall Street, but that plan backfired. (Reuters: Lucas Jackson)

It also said it also will buy at least US$500 billion ($816 billion) of Treasury securities and US$200 billion ($326 billion) of mortgage-backed securities to help calm the Treasury market, which is a bedrock for the world's financial system and influences stock and bond prices around the world.

Trading in the market began to get snarled last week, with traders saying they saw disconcertingly large gaps in prices offered by buyers and sellers.

"Despite whipping out the big guns," the Federal Reserve's action is "falling short of being the decisive backstop for markets," said Vishnu Varathan of Mizuho Bank in a report.

"Markets might have perceived the Fed's response as panic, feeding into its own fears."

The S&P 500 fell 9.6 per cent as of 10:10am (local time) before clawing back some value. The Dow Jones Industrial Average lost 2,371 points, or 10.2 per cent, to 20,814, and the Nasdaq was down 9.3 per cent.

Volatility appears to be the new normal following a dizzying week in which the Dow twice fell by more than 2,000 points and also record its biggest point gain ever — 1,985 points on Friday. Last week's drops also confirmed the end of the longest-ever bull market on Wall Street, which emerged from the financial crisis and ran for nearly 11 years.

AP

Topics: business-economics-and-finance, markets, stockmarket, united-states, japan, european-union

First posted March 17, 2020 02:22:55