Dow suffers biggest percentage drop in 33 years

The stock market on Thursday had its biggest drop since the Black Monday crash of 1987 as fears of economic fallout from the coronavirus crisis deepened.

The Dow industrials plunged more than 2,300 points, or 10%. The sell-of came despite action from the Federal Reserve and the European Central Bank. The steep drops over the last month have wiped out most of the big run-up on Wall Street since President Donald Trump’s inauguration. Markets have turned turbulent amid a cascade of shutdowns across the globe and rising worries that the White House and other authorities around the world can’t or won’t help the weakening economy any time soon.

The S&P 500 shed nearly 261 points, or 9.5%, while the Nasdaq Composite dropped 750, or 9.4%.

The stock rout was worldwide, with Europe’s benchmark index down 11% in a record drop. Brazil’s Ibovespa tumbled as much as 20% at one point, extending this year’s loss to almost 50% in dollar terms. Canada’s main gauge was off more than 12%.

With the S&P 500 wiping out all its gains since the end of 2018, investors are trying to guess at the effectiveness of policymakers’ measures to curb the spread of the coronavirus and limit its economic damage. Trump’s travel ban and tepid fiscal measures failed to impress most observers. Spirits were further dampened by new bans on public gatherings in the U.S. and professional sports leagues’ move to suspend operations.

“Markets likely need more. More innovation from central banks, more targeted help for the most vulnerable parts of the economy – and action from fiscal authorities to stop this transitory shock from developing into a more prolonged insolvency crisis,” said Seema Shah, a global investment strategist for Principal Global Investors. “Emotion is now driving markets.”

On another bruising day across markets:

– The S&P 500, Nasdaq Composite and Nasdaq 100 indexes sank deeper into a bear market, with losses from February closing records extending well past 20%.

– The slump triggered the second 15-minute trading halt this week shortly after the U.S. open.

– The MSCI All-Country World Index extended losses to enter bear-market territory.

– The cost of insuring debt issued by Europe’s investment grade companies surged to the highest since 2013.

– Japanese stocks closed more than 4% lower even after another liquidity pledge from the country’s central bank. Australian shares sunk deeper into a bear market despite a stimulus plan there.

– Oil extended losses toward 5%. Bitcoin slumped. Gold fell below $1,600 an ounce.

More bad news about the impact of the coronavirus further sapped investor spirits. The leading U.S. infectious-disease official said the testing system in the country is “a failing.” The European Union warned that the sickness threatens to exceed health-care capacity across the region “in a few weeks or even days.” The National Hockey League followed the National Basketball Association’s lead and suspended its season, while Major League Baseball said opening day would be delayed. In addition, the NCAA announced it was canceling its men’s and women’s Division I basketball tournaments.

“We need to see what is effectively a ‘declaration of war’ against the virus and full support to offset the economic damage that war will cost,” said Peter Tchir, head of macro strategy at Academy Securities. “Whatever has gone on this week, it’s not a liquidity crunch.”

Meanwhile, signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety.

“The risks have definitely risen,” said Chris Gaffney, president of world markets at TIAA. “The question is how long will this last and I don’t think anybody can predict that at this point.”