Stock trading was halted on Monday, marking the third trading halt in three weeks, and stocks plunged more than 10% after trading resumed. The Federal Reserve's emergency action to slash its benchmark interest rate to nearly zero failed to quell Wall Street's fears of a recession that could emerge from the coronavirus pandemic.
The Dow plunged 2,684 points, or 11.6%, to 20,502 when trading resumed on Monday morning. The broad-based S&P 500 the tech-heavy Nasdaq both slumped more than 10%.
The steep plunge in the S&P 500 triggered a "circuit breaker" that halt trading when stocks decline by 7%, 13% or 20% in a single trading session. It's the third trading halt since last Monday. The measures were first adopted after the 1987 crash, and until this week hadn't been tripped since 1997.
The Fed's surprise rate cut on Sunday is designed to shore up the economy by making it cheaper to borrow and to keep lending flowing to businesses and consumers. Even so, Wall Street is growing increasingly pessimistic because consumer spending — a bedrock of the U.S. economy — appears to be grinding to a halt, with restaurants shuttering and airlines cutting flights as demand dwindles as consumers practice "social distancing" and governments order school and business shutdowns.
Across the country, states and cities are closing schools, bars and restaurants in an effort to slow the disease but which leaves millions of Americans vulnerable to income losses. More than 4.4 million U.S. restaurant jobs are at risk in states that have shuttered eateries and bars, according to outplacement firm Challenger, Gray & Christmas.
"The only certainty at this point is more volatility," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in an email. "I would expect the market to price in a recession and if that turns out not to be the case – or if credible and specific fiscal and public health policies are put in place to contain the economic and public health risks – that is when you will begin to see a bottom in the stock market."
He added, "Unfortunately, the Fed will be unable to put much of a floor under the market, only Congress and the Executive Branch will be able to do that."
More than 3,700 people have tested positive for the new COVID-19 disease in the U.S. and at least 69 have died. Globally, the death toll was just over 6,500 on Monday, with the weekend seeing an alarming spike in fatalities in three European nations grappling with aggressive outbreaks.
The Fed said in a Sunday statement that the effects of the outbreak will weigh on economic activity in the near term and pose risks to the outlook. Policy makers said they will keep rates at nearly zero until they are confident the economy has weathered the storm, which a number of economists say could push the U.S. into recession.
"These are strong measures," Fed Chairman Jerome Powell said in a rare Sunday news conference, warning that growth in the second quarter would be slow. "The virus will run its course and economic activity will resume. In the meantime, we will act to support the flow of credit to companies and individuals."
Airlines and other travel businesses are suffering as the pandemic drives down demand for flights, hotels, cruises and other travel bookings. United Airlines on Sunday said its revenue in March is projected to shrink by $1.5 billion compared with a year earlier, and said it would cut flights by 50% for April and May.
"In just the first two weeks of March, we have welcomed more than one million fewer customers on board our aircraft than the same period last year," CEO Oscar Munoz and President J. Scott Kirby said in a message to their employees.
They added, "The bad news is that it's getting worse. We expect both the number of customers and revenue to decline sharply in the days and weeks ahead."
United is also cutting salaries for corporate officers by 50%, and expects its flight reductions to extend into the summer.