NEW YORK (AP) – Stocks are sinking again Wednesday, wiping out more than half of a huge rally from a day earlier as Wall Street continues to be hit by wild swings.
Another big central bank made an emergency cut to interest rates in hopes of blunting the economic pain caused by the coronavirus, which economists call the global economyâ€™s biggest threat. But investors are still waiting for details promised by President Donald Trump on potential aid for the economy through tax breaks and other relief.
Stocks fell from the opening of trading in New York, including a 3% drop for the S&P 500. Perhaps the best gauge of confidence in the economy on Wall Street recently, Treasury yields, pulled back. Asian markets also fell, while European markets were steadier following the cut by the Bank of England.
The Dow Jones Industrial Average fell 808 points, or 3.2%, to 24,222, and the Nasdaq was down 2.5%.
The speed of the marketâ€™s declines and the degree of its swings the last few weeks have been breathtaking. It was only three weeks ago that the S&P 500 set a record high, and the Dow Jones Industrial Average has had six days where it swung by 1,000 points since then. Itâ€™s done that only three other times in history.
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus, but the fear is that COVID-19 could drag the global economy into a recession by hitting it from two ends.
On the supply side, the worst-case scenario has companies with less things to sell as factories shut down and arenas dim the lights because workers are out on quarantine. On the demand side, companies see fewer customers because people are huddling at home instead of taking trips or going to restaurants.
Thatâ€™s why many analysts say markets will continue to swing sharply until the number of new infections stops accelerating.
While investors wait for that moment, whenever it comes, theyâ€™re hoping big, coordinated moves by central banks and governments around the world can help prop up a virus-weakened economy.
The Bank of Englandâ€™s emergency rate cut follows an earlier one by the Federal Reserve, and economists expect the European Central Bank to be the next to act. It has a meeting Thursday on monetary policy.
Italy’s government announced $28 billion in financial support for health care, the labor market and families and businesses that face a cash crunch due to the country’s nationwide lock down on travel.
Australia announced a $1.6 billion virus-fighting package and reportedly plans an additional $6.5 billion in economic stimulus. Japan and Thailand also have announced fresh help for businesses and workers.
Trump hinted at plans for tax cuts and other economic relief late Monday, but he has yet to unveil any details. His proposal for a cut to payroll taxes has met resistance on Capitol Hill.
â€œInvestors are still worried that those fiscal stimulus packages may not be able to contain the virus outbreak as well as to mitigate the impact on the economy,” said Louis Wong of Philip Capital Management.
Stock prices generally move on two main factors: how much profits companies are earning and how much investors are willing to pay for each $1 of them. For the first part, Wall Street is slashing its expectations, which undercuts stock prices.
For the second, all the worries about the coronavirus mean investors are less willing to pay high prices. Valuations were already above historical averages before the marketâ€™s declines began.
AP Business Writers Yuri Kageyama and Katie Lam contributed.