What’s happening: US stocks closed lower on Friday to record their worst week since the financial crisis of 2008, wiping out all the gains since the election of President Donald Trump.
What happened: Markets ended a turbulent session in the red zone on Friday. The Dow climbed as much as 2.2% initially in the session but closed down 4.6% after the WHO said that healthcare systems around the world are “collapsing” due to the spread of the coronavirus pandemic.
Why it matters: Various central banks and governments around the world have been announcing different measures to provide some relief to the markets. While these moves do lift investor sentiment, the impact of the positive news has not been lasting long. The Dow and S&P are trading in a bear market and have tumbled more than 30% in a month.
The Federal Reserve disclosed eight emergency measures last week, including relief for money market mutual funds, which are typically considered a risk-free investment. The Fed’s initiatives include a bond buying program and cutting interest rates to near zero. US Treasury Secretary Steven Mnuchin also announced pushing the tax-filing deadline to July 15 from April 15 due to disruptions caused by COVID-19. On Thursday, California ordered its residents to remain at home, with Illinois declaring a similar move on Friday.
The Dow plunged more than 900 points to close at 19,174 on Friday. The S&P 500 index dropped 4.3%, bringing its weekly loss to 15% to record its worst weekly performance since 2008. The Nasdaq 100 tumbled 3.8%.
The coronavirus pandemic has affected over 339,000 people worldwide and claimed 14,700 lives, according to Johns Hopkins University. The US is now the third worst hit country, behind only China and Italy, after reporting 35,000 cases and the death toll rising to 470.
With various companies shutting their stores and cutting working hours to control costs following the coronavirus outbreak, economists are expecting a strong rise in unemployment and a steep decline in consumer spending.
US stocks joined oil, which also delivered a terrible week, dipping below $20 per barrel during the trading session.
Why it matters: Major banks including Goldman Sachs and Deutsche Bank have warned of a US recession in the first half of 2020. Meanwhile, the Federal Reserve is expected to take some additional measures to shore up the markets. Investors are hoping for the Congress to agree on a $1 trillion package to ease the impact of the COVID-19 outbreak.
What to watch: US markets are expected to continue their downward momentum from Friday, with stock futures pointing towards a lower open today. The US economic calendar is light today, with the release of the Chicago Fed National Activity Index being the only main report scheduled.