Market Freezes Within Minutes of Opening as COVID-19 Pushes S&P 500, Stocks Down Further [Updated]
Wall Street opened the week of March 16 to Monday morning carnage, as COVID-19 triggered a quick circuit breaker during the opening minutes of the trading day as the S&P 500 and other stocks slid down further.
S&P 500 Circuit Breaker Tripped On Market Open
Trading halted at 9:31 AM, 1 minute into the trading day as the S&P 500 crossed the threshold of 7%. Before the trading day started the S&P 500 was down pre-market 9%.
After trading resumed, losses continued to mount up with the S&P 500 diving another 3 percentage points.
In the first few minutes of trading, the Dow Jones Industrial Average dropped 9.7%. The NASDAQ Composite Index was lower by 6%.
However, after the first circuit breaker, the market levelled off with losses hovering around the 9-11.5% mark as the trading day continued into its second hour.
Even before the market opened on Monday, futures contracts for the major averages hit their “limit down” levels, meaning they could not trade below that threshold and trading was halted until the market opened.
All this is after the Fed's second emergency rate cut this month, which was disclosed over the weekend. Investors, however, didn't think much of the Fed's move and data shows that they are moving capital into US government bonds which are considered to be some of the most solid investments in the world. The yield on the 10-year Treasury note fell 0.19%, to less than 0.7% in the early hours of Monday trading.
Markets Around the World Suffer Losses
Before the US market opened, China disclosed that the COVID-19 virus has decimated its economy quantifying the damage done. The National Bureau of Statistics said that industrial output had dropped 13.5% for the first two months of the year effectivley signalling that the economy had shut down during the worst of the pandemic. Unemployment has also jumped to 6.2%, with retail sales dropping 20% on year. All in all, the economy experienced its first quarterly contraction since 1989.
Beijing attempted to put a positive spin on the numbers, saying the impact was manageable.
"In the first two months, despite the sudden outbreak of COVID-19, under the strong guidance of CPC Central Committee with Comrade Xi Jinping at its core, all regions and departments coordinated efforts to advance both the prevention and control of the epidemic and the economic and social development," reads the banner of the bureau's website.
The S&P 500 wasn't the only index to start the week with crushing losses. During the Monday trading day in Europe, stocks crashed as the continent's biggest economies remained shuttered. The FTSE 100 tumbled more than 7% during the trading day, while the Stoxx Europe 600 index, one of the continent's largest indexes, fell 10% reflecting losses on Germany's DAX and France's CAC 40.
The energy-heavy Toronto Stock Exchange also plunged during its first few minutes of trading, triggering its circuit breakers in parallel to exchanges in New York.
Tech Stocks Feel the Pain
There are many tech stocks on the S&P 500, and they all suffered a dramatic drop during the first hour of trading.
Popular tech ETFs such as the Vanguard Information Technology ETF (NYSEARCA:VGT) and the Technology Select Sector SPDR Fund (NYSEARCA:XLK) also suffered double-digit losses during the early trading day.
Goldman Sachs Predicts GDP Drop
Goldman Sachs forecasted Sunday that the US economy would drop into a recession for the first half of the year. The investment bank predicted that the US economy would be flat for the first quarter of the year, before dropping by 5% during the second quarter, while rounding back to growth during the third and fourth quarters with 3-4% predicted during the two quarters. Overall the US economy will continue to grow this year, but only by 0.4%.