North American stocks tank after 3-day rebound as coronavirus fears grow

Coronavirus outbreak: Bank of Canada slashes key interest rate to 0.25%
The Bank of Canada cut its trend-setting interest rate by half a percentage point to 0.25 per cent in an unscheduled announcement on March 27.

Wall Street stocks tumbled on Friday, ending a massive three-day surge after doubts about the fate of the U.S. economy resurfaced and the number of coronavirus cases in the country climbed.

U.S. stocks deepened their losses late in the session, even after the House of Representatives approved a $2.2 trillion aid package – the largest in American history – to help people and companies cope with an economic downturn caused by the coronavirus outbreak and provide hospitals with urgently needed medical supplies.

The United States has surpassed China and Italy as the country with the most coronavirus cases. The number of U.S. cases passed 100,000, and the death toll exceeded 1,500.

READ MORE: Stock markets rally for 3rd straight day despite U.S. jobless numbers

“We have still not fully understood the degree of the economic impact,” warned Massud Ghaussy, senior analyst at Nasdaq IR Intelligence in New York.

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“Currently, from a policymaker’s perspective, it’s a relative balance between managing the spread of the virus and opening the economy.”

After the market closed, President Donald Trump signed the stimulus package into law.

The bill, along with unprecedented policy easing by the Federal Reserve, helped the S&P 500 surge 10.2 per cent for the week, its best week since 2009. But the U.S. stock market benchmark is still down about 25 per cent from its February high.

The financial impact of COVID-19
The financial impact of COVID-19

In its strongest three-day performance since 1931, the Dow surged 21 per cent in three straight days through Thursday, establishing it in a bull market, according to one widely used definition. Even after Friday’s drop, the Dow ended 12.8 per cent higher, its best week since 1938.

In Toronto, the S&P/TSX composite index was down 683.43 points, or 5.1 per cent, to 12,687.74

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The Canadian dollar was trading 71.14 cents US compared to an average of 71.04 cents US on Thursday.

The Bank of Canada also said on Friday morning it was cutting its key interest target by half a percentage point to 0.25 per cent in an unscheduled rate announcement.

READ MORE: Bank of Canada slashes key interest rate to 0.25%

In a statement on its website, the central bank said its decision to lower rates is aimed at cushioning the economic shocks from COVID-19 and a sharp drop in oil prices by easing the cost of borrowing.

The interest rate cut takes the key rate to what the central bank referred to as “its effective lower bound” or the lowest level that rates can be set.

Canada’s central bank is also launching two new programs. One will aim to alleviate strains in short-term funding markets, while the other will see the central bank begin acquiring federal government securities in the secondary market with a minimum of $5 billion per week.

Coronavirus outbreak: Bank of Canada slashes key interest rate to 0.25%
Coronavirus outbreak: Bank of Canada slashes key interest rate to 0.25%

Many investors see a strong risk the world market could fall deeply again as coronavirus infections increase and more people die, however.

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“Next week will depend on what happens over the weekend,” said Lindsey Bell, chief investment strategist at Ally Invest. “If there is a major acceleration over the weekend of coronavirus cases in New York and other states and the hospital system continues to get jammed up, then I think it will be a rough week for the market.”

Macroeconomic indicators offered a glimpse of the economic devastation from the crisis as the lockdown of major cities upends the lives of millions of Americans.

U.S. consumer sentiment dropped to a near 3-1/2-year low in March, according to a survey released on Friday, a day after data showed a record 3 million surge in jobless claims last week.

READ MORE: U.S. now has more coronavirus cases than any other country

The Dow Jones Industrial Average slumped 4.06 per cent to end at 21,636.78 points, while the S&P 500 lost 3.37 per cent to 2,541.47.

The Nasdaq Composite dropped 3.79 per cent to 7,502.38.

Volume on U.S. exchanges was 13.4 billion shares, its lowest since March 5, according to Refinitiv data.

Delta Airlines, American Airlines and United Airlines fell between six per cent and 11 per cent as U.S. Treasury Secretary Steve Mnuchin said the help designated for airlines in the aid package was not a bailout and that taxpayers would need to be compensated.

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WestJet announces layoffs for nearly 50% of staff due to COVID-19
WestJet announces layoffs for nearly 50% of staff due to COVID-19

Boeing Co slumped 10 per cent, but was still up more than 70 per cent for the week, after Mnuchin said the planemaker had no intention of using federal money.

The banking index fell 4.6 per cent, tracking U.S. Treasury yields as investors sought safety in high-quality assets.

The energy index was the biggest percentage loser among the 11 major S&P sectors, sliding 6.9 per cent, following a drop in oil prices.

READ MORE: Oil price crash expected to hit thermal oilsands production in Western Canada

Declining issues outnumbered advancing ones on the NYSE by a 3.17-to-1 ratio; on Nasdaq, a 2.98-to-1 ratio favored decliners.

The S&P 500 posted one new 52-week high and one new low; the Nasdaq Composite recorded nine new highs and 39 new lows.

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— With files from the Canadian Press