Markets have now completed a brutal seven-day losing streak — the worst since the 2008 financial crisis, with major benchmarks plummeting in panic selling related to the escalating coronavirus outbreak.
The illness continues its spread across multiple countries, with Nigeria and Mexico reporting their first cases on Friday, and the death toll mounting in places like Italy and Iran. On Friday, the World Health Organization, which has shied away from formally declaring the pathogen a pandemic, issued a dire warning that “global level” risks were growing.
The speed and depth of the sell-off — which saw the S&P 500 Index plunge into a correction within a week, while the Dow recorded back-to-back days of 1,000 point losses, has resulted in over $6 trillion worth of market value being obliterated.
Meanwhile, calls are growing for central banks and governments to coordinate a policy response amid the darkening global growth outlook. Federal Reserve chair Jerome Powell pledged on Friday to “use our tools” to backstop the U.S. economy as the coronavirus fears roil markets and jeopardize growth.
“On the back of COVID-19 news, we have lowered our forecast for GDP growth this year by another tenth to 1.6%,” wrote analysts at Bank of America late Friday — calling for three quarters of “growth recession.”
The bank added that “broken global supply chains will deplete inventories and delay investment. But what concerns us more is an adverse feedback loop between consumers and markets. The likelihood of a Fed cut has increased meaningfully. Depending on the spread of the virus and the market reaction, the Fed could act swiftly and aggressively.”
For perspective, the S&P, Dow and Nasdaq all saw their worst February since 2009. For the S&P, it was the 3rd worst February performance going back to 1960, when it shed 8.41%, according to Yahoo Finance data. The Dow also completed its third-worst month since 1930 (a roughly 10% drop), while the Nasdaq saw its fifth-worth February, going all the way back to 1972 (when it fell over 6%).
Treasury yields continue to set record lows, with the 10-year seeing the biggest February drop since 1986.