Topline: As stocks continue to plunge and investors anxiously await financial stimulus measures to mitigate the economic fallout from the coronavirus pandemic, President Trump insisted that markets will be “just fine,” despite Thursday’s massive sell-off.
- The stock market’s huge sell-off this week has continued, growing even worse on Thursday: The Dow Jones Industrial Average fell 10%—more than 2,300 points, while the S&P 500 and Nasdaq were down by 9.5%.
- Stocks got a brief respite when the Federal Reserve announced that it would inject over $1.5 trillion into short-term funding markets, but quickly dropped again amid the ongoing coronavirus sell-off.
- “The markets are going to be just fine, just fine,” Trump told a reporter outside of the White House on Thursday. “Why do you say that? They’re tanking,” the reporter asked in response, but Trump ignored the question and walked away.
- The large amount of uncertainty comes at a time when Wall Street is nervously awaiting more details on possible financial stimulus measures: Trading was halted briefly on Thursday, for a second time this week, after President Trump’s Wednesday evening speech failed to ease investor concerns about his administration’s response to the economic slowdown from coronavirus.
- Many details still remain unclear, however, and a large financial stimulus package doesn’t look likely anytime soon: Democrats and Republicans butted heads over a proposed coronavirus relief bill.
- President Trump and other Republican lawmakers have said that they don’t support the bill put forward by House Speaker Nancy Pelosi, which focuses on paid sick leave, unemployment insurance, food assistance and free coronavirus testing.
- Among the different financial stimulus measures also proposed by the Trump administration (separately from the House) are a massive payroll tax cut, relief to small businesses and employees, and federal aid to industries like airlines and cruises that have been hard hit by cancellations due to the pandemic.
Big numbers: Global markets lost a total of $4.7 trillion on Thursday, according to S&P. European markets also plunged on Thursday, falling 11% for their worst single-day drop ever after Trump’s decision to impose widespread travel restrictions.
Crucial statistics: The Dow is on pace for its worst drop since the 1987 ‘Black Monday’ market crash. U.S. stocks are now well into bear market territory—when that happens, a recession has followed 80% of the time, according to Bloomberg. All 11 sectors in the S&P 500 are down, with energy and financials leading the plunge.
Crucial quote: “Circuit breakers will do little to calm nerves and the fact that almost a quarter of the S&P 500 stocks didn’t even get to trade before the trading halt kicked in is very concerning,” says Oanda senior market analyst Edward Moya.
Tangent: Recession fears have continued to grow and are now spiking alongside market volatility: The odds of an all-out recession are now at 52%, according to Bloomberg Economics. Allianz’s chief economic advisor, Mohamed El-Erian, told CNBC on Thursday that “we are going into a global recession” driven by the coronavirus.
What to watch for: Fed fund futures are now pricing in a 100% chance that the Federal Reserve will cut interest rates to zero when it meets next week—if it doesn’t do so sooner in another emergency meeting. Trump has repeatedly criticized the Fed for not lowering rates faster, most recently blaming the central bank for being too “slow moving” in addressing the economic impact from the coronavirus pandemic.