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Coronavirus-Fueled Plunge Deals Final Blow to Bull Market

After closing a rally on Tuesday, stocks reversed course and dropped again in early morning trading Wednesday, while investors and companies braced for an end to the bull market.

MANHATTAN (CN) — The longest bull market in U.S. history has come to a close, with major markets opening to massive sell-offs Wednesday as the World Health Organization dubbed the coronavirus outbreak a pandemic.

The Dow Jones Industrial Average was hit the hardest, 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.

The bull market, which began in March 2009, has been rollicked the last few days by volatility, even as the Trump administration stoked criticism with its efforts to calm investors about the spreading coronavirus.

Monday’s stock market saw the sharpest drop in U.S. stock markets since the 2008 financial crisis, falling 7% in early morning trading that day before a circuit breaker temporarily halted trading.

The plunge was attributed mainly to caution over COVID-19, the disease caused by the coronavirus, which has affected more than 1,100 in the United States and well over 10 times that worldwide, according to data compiled by Johns Hopkins University. Globally the virus has killed nearly 4,600 people, 29 in the United States, data show.

Markets on Tuesday had recovered some of the losses from the day before, ending the day up 4.8%, only for stocks to drop 3% minutes after the opening bell Wednesday as the Dow Jones fell almost 1,000 points.

By the day’s end, the 20% drop from a high point earlier this year not only erased Tuesday’s gains but officially marked a bear market. The S&P 500 and Nasdaq also saw decreases in the opening 20 minutes of trading, dropping about 2.8% and 2.5%, respectively.

The fall follows a turbulent two days in the market. Monday’s stock market saw the sharpest drop in U.S. stock markets since the 2008 financial crisis, falling 7% in early morning trading that day before a circuit breaker temporarily halted trading.

The plunge was attributed mainly to the spreading COVID-19 coronavirus, which has affected nearly 120,000 worldwide and more than 1,000 in the United States, according to data compiled by Johns Hopkins University. Nearly 4,300 have died globally from the virus, 29 in the United States, data show.

Shortly after the markets opened Wednesday, President Trump called an emergency meeting with leading health officials and banking executives to address the crisis, telling Congress to cut short their own meetings with experts.

The administration has reportedly been putting together a stimulus plan to counter the economic effects of the virus. On Tuesday, President Trump had announced plans to boost the airline and cruise industries, which has helped shares at companies like American Airlines and Carnival stay somewhat above water. Despite these moves, leading airline companies have said they will not provide guidance for their fiscal year due to the virus’s effects on travel.

Nearly all industries saw losses Wednesday, but airlines, cruise companies and energy companies in particular were slammed.

Norwegian Cruise Line fell more than 20% on the day, as many leading airlines saw their shares decreases by at least 5%. Among energy companies that so steep drops, Occidental Petroleum shares fell more than 17% on the day.

Meanwhile, the Federal Reserve Bank announced it would cut interest rates by half a percentage point, while the New York Federal Reserve Bank announced Wednesday it would make daily infusions of up to $175 billion to help ease liquidity fears. The Bank of England also cut its key lending rate by half a percentage point to boost liquidity and improve investor confidence.

The White House also has plans to issue a temporary payroll tax holiday to help companies, while also pushing back the tax-filing deadline to help "virtually all individuals."

Still, many investors expect the carnage to continue. David Kostin, Goldman Sachs’ top U.S. stock strategist, said in an investor note Wednesday that a rebound may occur later in the year but for now, “we believe that the S&P bull market will soon end.”

“Both the economy and the financial economy are exhibiting acute signs of stress,” he warned investors.

Other countries also have a dimmer view of the virus and its impact on the world economy. Germany’s Chancellor Angela Merkel said Wednesday that she expects as much as two-thirds of her country to be infected with coronavirus.

At 10:20 a.m. Wednesday, Trump said his administration has handled the crisis effectively. “Our team is doing a great job with CoronaVirus!” the president wrote.

He tweeted again just before closing bell: “I am fully prepared to use the full power of the Federal Government to deal with our current challenge of the CoronaVirus!”

As of press time, the White House has not put forth a specific stimulus package.

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