MANHATTAN (CN) — The U.S. government’s various attempts to shore up investor confidence amid mounting coronavirus fears proved unsuccessful Thursday as the stock market had the ignominy of facing its largest one-day plunge since the market crash of 1987.
Following the worst day for the Dow Jones Industrial Average since the 2008 recession on Monday, the stock market index closed Thursday at nearly 10% lower than it began at starting bell, while the S&P 500 and Nasdaq closed 9.5% and 9.4% lower, respectively.
Over the last 24 hours, the White House, Congress, and central banks all made efforts to stymie the pain.
In a rare move, the New York Federal Reserve promised an infusion of $1.5 trillion into short-term lending markets to keep banks lending. The Fed also pledged to purchase up to $60 billion of Treasury bonds after problems in that market were reported earlier this week.
“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement. “Reserve management purchases into the second quarter will continue to be conducted with this maturity allocation. The terms of operations will be adjusted as needed to foster smooth Treasury market functioning and efficient and effective policy implementation.”
The central bank had previously pledged to cut interest rates by half a percentage point, and the New York Fed announced daily infusions of up to $175 billion to help ease liquidity fears. Central banks in other countries have tried similar measures.
Elsewhere in government, leaders scrambled. Senate Majority Leader Mitch McConnell initially said Thursday that Congress may not act on a House bill to combat the coronavirus until after its recess, which doesn’t end until March 23.
Those plans quickly evaporated as McConnell reversed course and said the Senate would be in session next week.
On Wednesday, hours after the longest bull market in U.S. history ended, President Trump spoke in an attempt to calm the American people and markets. He announced plans for a payroll tax holiday and a partial travel ban to Europe, but the speech had no positive, and perhaps a negative effect, on markets.
Trading was halted in early morning hours Thursday after stock futures on the Dow fell more than 1,100 points overnight to its threshold of 5%, with similar drops among futures on the S&P 500 and Nasdaq. Circuit breakers temporarily halted pre-market trading due to the losses.
Futures markets can be good indicators of where markets will stand once they open, as they represent agreements to sell or purchase stocks or other financial instruments.
Earlier Thursday, European markets plunged at open and remained down, with the Stoxx Europe 600 falling more than 11% on the day, the worst one-day decrease in that European market history.
The European Central Bank responded with a raft of measures aimed at opening up liquidity among its banks, saying it will work with individual banks to adjust timetables, processes and deadlines on loans.
Market jitters were not helped by news that the National Basketball Association was suspending its season after one of its players tested positive for the COVID-19 virus strain, or that actor Tom Hanks and his wife, Rita Wilson, both had contracted the virus as well.
The economic damage from the coronavirus began in earnest on Monday, when U.S. markets saw their sharpest drop since the 2008 financial crisis, falling 7% in early morning trading that day before a circuit breaker temporarily halted trading.
Things picked up briefly on Tuesday, but on Wednesday the losses began mounting again with the Dow Jones falling 1,400 points to end up 5.85% lower than Tuesday and more than 20% under its high point of trading last month. The S&P 500 and Nasdaq also suffered, falling 4.89% and 4.7%, respectively.
COVID-19 has affected more than 1,100 in the United States, and 10 times that number globally, according to data compiled by Johns Hopkins University. Nearly 4,700 have died globally from the virus, 38 in the United States, data show.
The Dow Jones, once a coveted talking point for the White House, has slipped closer to where it was when Trump took office. On Inauguration Day 2017, the Dow was at 19,827. It reached its high point on Feb. 12, 2020, when it hit 29,551.
On Thursday, the Dow settled at 21,200.
Since the outbreak, the White House has tried several measures to stem the tide, both of the virus’ spread and its economic ramifications. On Tuesday, the president announced plans to boost the airline and cruise industries, though companies in both those industries have seen their shares plummet.
On Wednesday, Norwegian Cruise Line fell more than 20% on the day, while airline companies saw decreases of at least 5%. Both industries continued to hemorrhage losses in premarket trades, with shares of major airlines falling more than 14% and leading cruise ship companies falling as much as 25%.
Other measures to help the economy are still in the works. Trump has been pushing hard for a temporary payroll tax holiday to assist companies, though he has gotten pushback from Congress on that plan, which some say would not do much.
Another measure, a 30-day ban on travel by foreigners to and from certain European Union countries, caused backlash from those countries, which called the measure unfair given the global nature of the coronavirus outbreak and said it was done “unilaterally and without consultation.”
The new restrictions caused European airline stocks to suffer, with Lufthansa and British Airways stock both losing at least 10% in value.
Some critics of the president called his speech disastrous. Former Treasury Secretary Lawrence Summers tweeted Thursday morning that President Trump had set “what I believe is a new world record for presidential market destruction,” estimating that Trump “destroy[ed] about $500b in equity market value in course of an 11 minute speech.”
The administration has defended its actions. In an interview with NBC Thursday morning, Vice President Mike Pence said the president had taken “unprecedented action” in the travel ban.
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