Dow drops 7.8% as crashing oil prices, virus fears slam markets

The Dow Jones industrial average sank 7.8% on Monday, its steepest drop since the financial crisis of 2008, as a free-fall in oil prices and worsening fears of fallout from the spreading coronavirus outbreak seize markets.

The sharp drops triggered the first automatic halts in trading in two decades.

U.S. stocks are now down 19% from the peak they reached last month. Bond yields plumbed new lows as investors sought safety.

The price of oil plunged nearly 25% after Saudi Arabia indicated it would ramp up production after Russia refused to production cutbacks in response to falling demand.

The Dow Jones industrial average lost 2,013 points, or 7.8%, to close at 23,851. The Standard & Poor’s 500 lost 225 points, or 7.6%, to end at 2,746. The Nasdaq dropped 624 points, or 7.3% closing at 7,950.

European markets entered a bear market, registering their heaviest losses since the darkest days of the 2008 meltdown, as the damage mounted from the crisis that has closed factories, schools and stores and led to travel bans and unprecedented quarantines.

“The market has had a crisis of confidence,” said Willie Delwiche, investment strategist at Baird.

The market slide came as Italy, the hardest-hit place in Europe, began enforcing a lockdown against 16 million people in the north, or one-quarter of the country’s population, with masked police officers and soldiers checking travelers’ documents amid restrictions that affected such daily activities as enjoying a espresso at a cafe or running to the grocery store.

The turmoil is expected to push Italy into recession and weigh on the European economy.

While low oil prices can translate into cheaper gasoline, they wreak havoc on energy companies and countries that count on petroleum revenue, including the No. 1 producer, the U.S.

On Wall Street, the S&P 500 plunged 7.4% in the first few minutes after the opening bell before trading was halted by the market’s circuit breakers, first adopted after the crash of October 1987 and modified over the years to give investors a chance to catch their breath. The market-wide circuit breakers have been triggered only once before, in 1997.

After the 15-minute pause, the S&P trimmed its losses but was still down 6.9% in the late afternoon. The Dow was down 1,802 points, or 7%, to 24,062. The Nasdaq gave up 6.4%.

U.S. stocks edged ever closer to a bear market, defined as a drop of 20% from its peak, while a gauge of fear on Wall Street reached its highest level since the 2008 global financial crisis.