Focus: Kiwibank chief economist Jarrod Kerr weighs in on the economic crisis caused by coronavirus.
U.S. markets finished one of their all-time messy weeks Friday, tumbling more than 10 per cent from where they began Monday to wrap up their worst weekly finish since the 2008 financial crisis.
Stocks were wrenched all week in hourly spasms as investors try to fathom where the coronavirus will eventually leave the U.S. economy.
The craziness ran right up to Friday's closing bell, as the Standard & Poor's 500 index and Dow Jones industrial average plunged more than 3 per cent minutes after the World Health Organisation warned that world health systems were "collapsing" under the coronavirus.
The Dow closed shed than 925 points, more than 4.6 per cent, to close a 19,160 -- erasing all Trump-era gains. The S&P closed down 4.4 per cent. The Nasdaq f fell around 3.8 perc ent.
Investors remain in the same fog they have inhabited since markets began their swift drop in February and the S&P 500 and Dow had reached all-time highs. All three indexes are now in a bear market decline of at least 20 per cent from their top.
"We had years of low volatility and rising markets, and this virus crisis made it call come to an end at once," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
"There is no endpoint in sight, and that's causing a degree of panic because people are saying, 'I just need to hold some cash.' There will be more turmoil, but we flushed out a lot of the people who were leveraged. A lot of good things are happening to restore liquidity and order to markets."
Markets lurched all week as a seemingly endless stream of federal government measures were rolled out to douse financial fires in vital corners of the economy.
Nothing signified the chaos like oil prices, which dipped below US$20 per barrel — unheard of in recent years. Oil prices are so low that the industry may go through a generational restructuring. Prices need to be at least in the US$50 barrel range for companies and producing states to make a profit.
Oil prices saw their worst and best percentage changes in back-to-back days Wednesday and Thursday as the Saudi Arabian-Russian feud threatened drop the price to single digits. The federal government said it might jump in, ordering millions of barrels of oil purchases for the nation's Strategic Petroleum Reserve to help soak up excess supply and protect prices.
Governments and central banks around the globe offered a torrent of support to relieve the economic stranglehold of the coronavirus.
"People feel like a battered boxer, unsure of how to respond to a flurry economic punches," said Sam Stovall of CFRA Research. "The good news out of this bad news is the volatility looks like it is coming to a crescendo. Only two other periods in the past half-century have seen a high level of volatility. History tells us the worst may be behind us.
The Federal Reserve has rolled out eight emergency actions this week, establishing a special backstop for money market mutual funds (typically a risk-free place for investors to store cash), slashing interest rates to zero, and restarting the crisis-era bond-buying program known as "quantitative easing."
The central bank has also announced plans to buy short-term business loans known as commercial paper, ramped up "swap lines" with foreign central banks to ensure other nations have enough dollars, allowed banks to borrow money from the Fed at a 0.25 per cent interest rate and announced loans for primary dealers of U.S. Treasury bonds.
Treasury Secretary Steven Mnuchin announced Friday that the administration has moved the IRS deadline for filing taxes from April 15 to July 15 due to the disruption caused by the coronavirus. The new deadline will give millions of taxpayers more time to fill out their tax forms as coronavirus upends daily life across the country. Mnuchin made the announcement on Twitter, citing President Trump's directive.
Signs of progress in the war against covid-19 stoked positive feelings on Wall Street. The U.S. dollar, which had skyrocketed as worried investors rushed to secure greenbacks, weakened against other currencies. Oil, which sank to a 20-year low earlier in the week amid cratering demand, also rebounded. Brent crude, the global oil benchmark, was up 2.7 per cent in early trading at US$29 a barrel.
Investors also found hope increasingly stringent measures to combat the coronavirus pandemic, as California initiated a lockdown for its 40 million residents, while Italy expanded its own large-scale lockdown. As of Friday, more than 240,000 coronavirus cases have been confirmed across the globe. The World Health Organisation noted that it took more than three months to reach 100,000 cases worldwide — but only 12 days to log the next 100,000.
