Bear Market: Dow Drops Over 1,400 Points, Ending Longest Bull Market In U.S. History

Topline: The stock market plunged on Wednesday, with the Dow Jones Industrial Average sliding more than 1,400 points—officially entering a bear market for the first time since the 2008 financial crisis—after the World Health Organization declared the coronavirus outbreak a global pandemic.

• The major indexes all plummeted during Wednesday’s session: The Dow ended the day down almost 6%, while the S&P 500 fell 4.9% and the Nasdaq by 4.7%.
• Markets started the day in the red, as investors nervously awaited more details on the Trump administration’s economic response to the coronavirus—though it has become clear that a large stimulus package is unlikely to get rolled out quickly.
• Losses accelerated on Wednesday after the WHO officially declared the coronavirus a global pandemic, ending the longest bull market in U.S. history and sending the Dow into a bear market for the first time since the 2008 financial crisis.
• Earlier this week, following Monday’s historically brutal sell-off, stocks rallied briefly on Tuesday when President Trump promised “major” financial stimulus measures to address the fallout from the coronavirus outbreak—but doubts remained over a lack of specific details and an unclear timeline.
• “This is the painful part of price discovery in a very uncertain market,” says Mark Freeman, chief investment officer at Socorro Asset Management. “You’ve now got more sellers than buyers, and unfortunately from a liquidity standpoint that tends to put significant downward pressure on [stock] prices.”
• Crude oil prices are on track for their worst week since 2008, after falling another 4.6% on Wednesday amid the ongoing price war between Saudi Arabia and Russia which will put added pressure on U.S. shale companies.

Crucial quote: “We’re entering a phase where we’re seeing more distressed market activity,” says Freeman. “We’ve gotten to the point where 4% either up or down in one day is almost normal—that’s not normal!” In the current environment, he says, volatile trading is becoming the norm as the coronavirus wreaks havoc on stocks and causes both “a supply and a demand shock.” 

Chief critic: “Investors shouldn’t fall victim to the theatrics – there is nothing substantive that Congress will pass at this time and thus all Trump can really do is harangue and deflect,” says Vital Knowledge founder Adam Crisafulli.

Crucial statistic: Recession fears have risen significantly, as the number of global coronavirus cases now totals more than 100,000, according to data Johns Hopkins University. In the U.S. alone, more than 1,000 cases have been confirmed—some estimates predict that up to 150,000,000 Americans could contract the virus.

Key background: Anxious investors are hoping for a quick economic response from the government to address the fallout from the coronavirus. “It all comes down to what measures can get finalized—markets expect to see something, it’s just a question of what,” says Freeman. “The market is also looking back towards the Federal Reserve, for help wherever it can get it.”  The stock market has seen wild volatility in recent sessions, as coronavirus starts to take a heavier toll on U.S. businesses and economic activity. On Monday, stocks underwent a historic sell-off—where the Dow and S&P fell almost 8% in their worst day since 2008. Both indexes rose almost 5% on Tuesday amid news of potential economic stimulus, but plunged again on Wednesday following a lack of specific details and unclear timeline for the government’s response. Stocks accelerated their losses later in the day after the WHO finally declared coronavirus a global “pandemic.” The Dow has now officially entered bear market territory, ending the longest bull run in U.S. stock history.

What to watch for: Trump will be making a statement later tonight on the government’s plan to respond to the coronavirus. Both the administration and Congress are weighing different financial stimulus options to help prevent an all-out recession in the U.S.