Stocks closed mostly lower Friday, but off session lows, while recording their worst weekly slide since October 2008 amid intensifying fears over the potential degree of damage the spread of COVID-19 will inflict on the global economy and supply chains.
How did major benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.04% shed 357.28 points, or 1.4%, to settle at 25,409.36, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.24% dropped 24.54 points, or 0.8%, to end at 2,954.22. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.43% gained less than a point to finish at 8,567.37.
All three U.S. benchmark stock indexes closed in correction territory Thursday, defined as a decline of at least 10%, but not more than 20%, from a recent peak.
For the week, the Dow fell 12.4%, the S&P 500 lost 11.5% and the Nasdaq shed 10.5%.
What drove the market?
Stocks pared back session losses after Federal Reserve Chairman Jerome Powell, in a brief statement on Friday afternoon, said the central bank was “closely monitoring” the coronavirus epidemic emanating from China and its potential to slow economic growth, sparking some optimism that the Fed will cut rates to help bolster the economy.
Still, the major benchmarks remained under pressure on fallout concerns of the epidemic, and as investors tried to put a floor under their monthly losses.
“Probably one of the biggest issues of this selloff is that it’s coming at the end of the month,” said Kent Engelke, chief economic strategist at Capitol Securities Management, in an interview. “I really think many people have not recognized the carnage that’s taken place. The question is, what are people going to do when they look at their monthly statements on March 1?”
The Dow lost 10% in February, the S&P 500 shed 8.4% and the Nasdaq was off 6.4%.
Analysts at UniCredit Bank said a bottom for stocks would probably require a clear sign of a leveling off in the number of confirmed cases in China of COVID-19, the infectious disease that reportedly originated in Wuhan, China late last year. Based on the latest statistics, that looked unlikely to materialize in the next few days.
“Consequently, the rout in equity markets, and with it, the ongoing decline in U.S. Treasury and (German) bund yields, is most probably not over yet,” they wrote. Treasurys and other core government bonds have rallied, pushing down yields, which move in the opposite direction of bond prices, as the stock-market rout has intensified.
Investors have endured days of increasingly grim updates on the spread of the coronavirus, as new infections continue to rise even as countries enact stronger and stronger measures. New Zealand and Nigeria were among the latest countries to report their cases.