Dow drops 1,000 points amid fears of a coronavirus pandemic

Wall Street plunges as COVID-19 spreads

The Dow Jones Industrial Average slumped more than 1,000 points in intraday trading for the third time this week on Friday, as the rapidly spreading coronavirus outbreak raised fears of global recession.

Over the week, virus fears have wiped nearly $3 trillion off the combined market value of S&P 500 companies, putting the three main indexes on track their worst week since the 2008 global financial crisis.

Dow Jones nosedives nearly 1,200 points into correction territory
Dow Jones nosedives nearly 1,200 points into correction territory

As the world prepares for a likely pandemic, investors rushed to safe assets, deepening an inversion of the U.S. Treasury yield curve, a classic recession signal.

Story continues below advertisement

The benchmark S&P 500 fell about 12% from its record closing high hit last week, confirming its fastest correction in history on Thursday.

READ MORE: Falling oil prices set for biggest weekly drop since 2008

At 10:03 a.m. ET, the Dow Jones Industrial Average was down 1,058.08 points, or 4.11%, at 24,708.56, the S&P 500 was down 118.91 points, or 3.99%, at 2,859.85. The Nasdaq Composite was down 293.97 points, or 3.43%, at 8,272.51.

In Toronto, the S&P/TSX composite index was down 573.63 points, or 3.46%, at 16,139.66 at 12:25 p.m. EST.

READ MORE: Dow Jones sinks nearly 1,200 points amid coronavirus worries, worst 1-day drop since 2011

All the 11 S&P sectors shed at least 2% and the defensive utilities, consumer staples and real estate sectors dropped more than 3%. The three sectors have outperformed the benchmark index this month.

“This selling is a bit extreme for something that we don’t know enough about,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

“What I do know is that the coronavirus is not going to lead us into a financial crisis that is long lasting. It could put us in a technical recession, but the real concern is does that recession cause the U.S. consumer to pare back on spending?”

Story continues below advertisement
Grim China, Germany data trigger recession fears, send markets plunging
Grim China, Germany data trigger recession fears, send markets plunging

While the magnitude of the economic damage from the containment measures, which have crippled supply chains and hit business investment, remained unclear, analysts have sharply downgraded their outlook for growth and corporate earnings.

Adding to worries, the Commerce Department’s data on Friday showed U.S. consumer spending rose less than expected in January, a loss of momentum that could be exacerbated by the virus outbreak.

READ MORE: Toronto stock exchange halts trading over technical issue, says systems ‘ready’ for Friday

Traders are now pricing in an interest rate cut by the Federal Reserve as soon as next month, but many have expressed doubts about how this would mitigate the impact of the outbreak.

Among individual stocks, Mylan NV dropped 6% after the drugmaker cautioned a financial hit from the coronavirus outbreak and warned of drug shortages in case of continued spread of the virus.

Story continues below advertisement

Declining issues outnumbered advancers for a 9.24-to-1 ratio on the NYSE and a 4.63-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 108 new lows, while the Nasdaq recorded 11 new highs and 386 new lows.

— With a file from Erica Alini at Global News