Stock market investors took another bath in red ink on Wednesday, with the TSX, Dow Jones, S&P 500 and Nasdaq all down by between three and five per cent.
Just about everything was once again lower, as the coronavirus currently sweeping around the globe infects stock markets with something almost as worrisome: fear.
On Tuesday, U.S. President Donald Trump announced a modest stimulus package designed to offset the impact of the virus, but by Wednesday it was clear that investors thought measures such as a payroll tax reduction are nowhere near enough to offset the economic damage that the virus could do to the world’s largest economy.
“Every day that passes makes the economic impact of coronavirus that much worse,” said Kristina Hooper, Invesco’s chief global market strategist. “The government probably should have been thinking about stimulus last month.”
The S&P/TSX Composite Index was down by 577 points, or almost four per cent, in the afternoon, while the Dow fared even worse — off 1,389 points, or more than five per cent. The S&P 500 and Nasdaq were both down by roughly five per cent each.
Twenty-nine of the 30 companies on the Dow Jones were lower, led by plane maker Boeing, which lost 15 per cent of its value after the company said it would draw down a $13 billion credit facility as soon as Friday.
The lone exception was United Health, which eked out a gain of 0.6 per cent.
All 11 different sub-indexes on the TSX were lower, but hard-hit oil company names were battered once more. Companies like Suncor, Cenovus and Husky Energy, which have already lost more than a third of their value since the sell-off began, lost another seven, three and five per cent of their values.
The sell-off brings the total losses since the sell-off began in late February to almost 20 per cent in Toronto and New York. That’s the technical definition of a bear market.
Larry Berman, chief investment officer at ETF Capital Management, says the market is simply responding to the realization that the world’s largest economy is woefully under-prepared for a pandemic. On Wednesday, the WHO said the COVID-19 outbreak is a pandemic.
“This is spreading in communities and there’s no infrastructure,” he said. “You’ve got doctors posting on Twitter that they’re sick themselves and they can’t themselves get a test. I mean it’s insane how far behind the curve they are.”
Oil lost another dollar to trade at just over $33 US per barrel. The price of West Texas Intermediate has lost about 20 per cent of its value since Saudi Arabia and Russia kicked off a race-to-the-bottom price war last weekend.
The blend of crude from Canada’s oilsands lost 87 cents to change hands at $20.63 a barrel.
“Investors are just kind of sitting back and letting the market carnage play out,” Keith Bliss, managing partner and CEO at iQ Capital, told Reuters. “They will step back in when things seemed to have settled down.”