Friday’s passage of a $2 trillion package designed to tide the nation over until the economy restarts has yet to quell a population fretting over its financial future.
“There’s a lot of uncertainty in the world over the virus and over people’s concern for their financial prosperity,” said Sarat Sethi of Douglas C. Lane & Associates. “We are experiencing a humanitarian crisis and a financial crisis at the same time, and that is being expressed through massive volatility in the markets.”
The Dow Jones industrial average finished Friday with a 915-point loss. At 21,636.78, the index is down more than 24 percent for 2020 and way off the all-time peak it set on Feb. 12. Multi-trillion-dollar rescue packages this week from the Federal Reserve and Capitol Hill sparked a robust midweek rally that gave the Dow its second-best three-day run in history, and dragged the blue chips back above the key 20,000 threshold.
Despite Friday’s loss for the day, the Dow enjoyed its best week since 1938. The week before had been one of its worst.
“The speed and breadth of these moves is mind-boggling,” said Howard Silverblatt of S&P Dow Jones Indices. “We’ve never seen percentage moves of this size. Stocks are moving on every piece of data that comes out.”
The Standard & Poor’s 500 index and the Nasdaq composite fell 3.4 and 3.8 percent, respectively. The S&P’s finish at 2,541.47 still represented a 10.2 percent gain for the week. But the broad index is down more than 21 percent for the year. The Nasdaq closed at 7,502.38.
Even as the $2 trillion rescue package went to the White House on Friday afternoon for the president’s signature, the pandemic’s toll mounts by the hour. The United States now has the most confirmed cases in the world and nearly 1,500 deaths. A record 3.3 million Americans applied for unemployment benefits last week, Labor Department data show, and economists say more than 40 million Americans could lose their jobs by mid-April.
All but two of the Dow’s 30 shares went negative Friday. Consumer goods giant Procter & Gamble and Travelers were the two bright spots. Boeing led the pack into the red with a 10 percent pullback. Boeing’s stock had nearly doubled this week on the expectation that it will benefit from the federal relief package.
Even though the markets were significantly up for the week, analysts cautioned investors to brace for more big drops.
“Don’t be too quick to uncork the champagne,” said Sam Stovall of CFRA Research. “Friday’s slide tells us that investors are taking profits before the weak data that is surely coming sends stocks back down to retest their lows.”
All 11 S&P stock market sectors were negative on Friday, and most are down at least 10 percent on the year. Energy has been hit the hardest, dropping by about half. With airlines, trucking and automobiles virtually shut down due to the coronavirus outbreak, oil demand has evaporated. Some oil experts have speculated that crude prices could descend below $10 per barrel, a price not seen in nearly half a century. Gas prices at the pump have dropped to 99 cents in some places.
“If we go below $10 for any extended period, it will be devastating to the entire industry from small to big players,” said John Kilduff of Again Capital. “Many will go bankrupt. But it will also send a shudder through consumers, who will realize that there must be something much bigger that is wrong with the economy for demand to be so low.”
Oil prices are only part of the troubled equation. Airlines, hotels and the restaurant industry — all reliant on consumer spending — have seen revenues deteriorate as people stay home. The federal rescue is designed to bring relief to those sectors and helped spark the three-day rally that topped out on Thursday.
The gains dissolved on Friday as investors digested the 3.3 million unemployment filings that were reported on Thursday and the millions more that are expected to follow in coming weeks. A new report released Friday on consumer sentiment didn’t help. The University of Michigan’s consumer survey fell to its lowest level since October 2016.
“No one is flying airplanes. No one is taking vacations. No one is going to the shopping mall,” said Chris Rupkey of MUFG Union Bank. “This economy is going to tank, and the consumers who took this month’s survey are plainly just deers looking into the headlights, completely unaware about the disaster that is about to hit them.”
Markets across Europe slid, too. Britain’s FTSE 100 dropped 5.3 percent as Prime Minister Boris Johnson announced he tested positive for the coronavirus and is self-isolating. Germany’s DAX fell 3.7 percent, and the benchmark Stoxx 600 shed 3.3 percent.
Asian stocks were on the upswing. Japan’s Nikkei 225 ended the day with a gain of 3.9 percent. Hong Kong’s Hang Seng ticked up 0.6 percent, and the Shanghai composite rose 0.3 percent.
With an economic stimulus bill on the way, “attention will turn back to the health crisis,” wrote Wayne Wicker, chief investment officer of Vantagepoint Investment Advisers, in a note Thursday afternoon.
“More bad headlines are coming, more people’s health will be negatively impacted, which will negatively affect investor psychology,” Wicker wrote. “That will provide opportunities to get back in the market if you feel you’ve missed it.”