Wall St plunges again as fears of virus-induced recession grow

New York  — US stock indexes plunged about 7% on Monday, as the Federal Reserve’s drastic interest rate cut to near zero stoked fears of a coronavirus-driven recession.

Trading on Wall Street’s three main stock indexes was halted for 15 minutes shortly after the open, the third such pause in six days, as the S&P 500 index plunged 8%, triggering an automatic cut-out.

The benchmark index slid as much as 11.4%, shedding about $2-trillion in market value, before bargain hunting helped the indexes claw back some losses.

A sharp cut in interest rates by the Federal Reserve ahead of schedule and its pledge of huge asset purchases added to the alarm about the pandemic that has paralysed supply chains and squeezed company revenue.

Credit concerns

“It’s not just about a reduction in earnings growth, or that you will have not have earnings growth. There’s credit concerns and cash flow concerns, that’s why the Fed acted,” said Tom Martin, senior portfolio manager at GlobAlt Investments in Atlanta.

“You have a lot of evidence that things are still in the process of getting bad and we don’t really know how bad.”

Underscoring the economic blow of the outbreak, severe virus containment measures sent China’s factory production tumbling at its fastest pace in three decades.

Rate-sensitive financial stocks plunged 9.3%, leading declines among the major S&P sectors. The sector also came under pressure after the big US banks said they would stop buying back shares.

Energy stocks tracked a near 10% slump in oil prices, while technology stocks shed 7.6%.

Apple, Microsoft and Facebook  fell more than 7% each and were the biggest drags on the S&P 500. Wall Street’s fear gauge jumped 17.24 points to 75.29.

As bars, restaurants, theatres and movie houses in New York and other major cities were ordered to shut, US states pleaded with the Trump administration to co-ordinate a national response to the outbreak.