Dow prepares to finish its worst first quarter in history

The Dow Jones Industrial closed down more than 400 points on Tuesday, ending one of Wall Street’s worst first quarters on record due to the collapse in oil prices and economic damage wrought by the coronavirus pandemic.

The main stock indexes flipped between losses and gains in morning trading, and then plunged on news from New York that new cases and deaths there had hit record highs on Monday. 

New data on Tuesday revealed that U.S. consumer confidence dropped to near a three-year low in March as households worried about the economy’s near-term outlook amid the pandemic. 

Sliding from the record highs of mid February, the Dow Jones and S&P 500 indexes ended the quarter more than 18 percent lower from the start of the year as the health crisis deepens in the United States and disrupts supply chains.    

The Dow Jones and S&P 500 indexes are now set to end the quarter more than 18 percent lower from the start of the year. Pictured: The New York Stock Exchange is seen on Sunday

Despite the recent rally, the slump from the mid February record highs seen the Dow Jones suffer its worst first quarter ever, while the S&P 500 saw its worst since 1938. 

The tech-heavy Nasdaq closed out its worst first three months of the year since 2008. 

At the closing bell, the Dow Jones Industrial Average was down 413.11 points, or 1.85 percent, at 21,914.37. 

The mood in markets seems tightly linked to evidence about the spread of the new coronavirus pandemic. That was evident with the news Tuesday that Spain saw a record 849 daily deaths of people who had contracted coronavirus. 

Before the Spanish death toll numbers, sentiment had been boosted by the strong Chinese data showing that the world’s second-largest economy was recovering after authorities relaxed anti-disease controls and allowed factories to reopen as the number of infections have fallen sharply.

The monthly official manufacturing purchasing managers’ index – a broad gauge of economic activity – rose to 52.0 points in March from 35.7 in February, while the equivalent index for the non-manufacturing sector spiked to 52.3 from 29.6. 

Anything above 50 indicates an expansion in activity, so the sharp rebound is welcome news in the markets even though it points to fairly tepid growth.

‘Investors should be careful about drawing too many inferences from one figure, since one swallow does not a summer make,’ said Chris Beauchamp, chief market analyst at IG in London.

The unoccupied NYSE trading floor, closed temporarily for the first time in 228 years as a result of coronavirus concerns, is seen in a file photo

The unoccupied NYSE trading floor, closed temporarily for the first time in 228 years as a result of coronavirus concerns, is seen in a file photo

The Dow is on course for its worst first quarter ever, as seen in the year-to-date view

The Dow is on course for its worst first quarter ever, as seen in the year-to-date view

Since the height of the selling in markets a couple of weeks back, the mood has appeared to improve as governments and central banks use everything they can to contain the economic damage of the pandemic. 

The S&P 500, for example, is coming off its best week in 11 years, though it remains 22.4 percent below its record set last month, and oil tumbled to an 18-year low.

The number of known infections around the world has topped 780,000, according to Johns Hopkins University. The United States has the highest number in the world, more than 160,000.

Most people who contract coronavirus have mild or moderate symptoms, which can include fever and cough. But for others, especially older adults and people with existing health problems, the virus can cause pneumonia and require hospitalization. 

More than 37,000 have died worldwide due to coronavirus, while more than 160,000 have recovered.

‘We’re also still not even close to peak coronavirus in the U.S. which has already reported more cases than any other country and will sadly likely see a huge spike in the number of deaths, meaning further lockdown measures will likely follow,’ said Craig Erlam, senior market analyst at OANDA Europe. ‘Huge challenges still lie ahead.’ 

Goldman Sachs further slashes economic forecast, saying quarterly GDP will drop a staggering 34 percent

Goldman Sachs said on Tuesday the second-quarter U.S. economic decline would be much greater than it had previously forecast and unemployment would be higher, citing anecdotal evidence and ‘sky-high jobless claims numbers’ resulting from the coronavirus pandemic.

Goldman is now forecasting a real GDP sequential decline of 34 percent for the second quarter on an annualized basis, compared with its earlier estimate for a drop of 24 percent. 

It also cut its first-quarter target to a decline of 9 percent from its previous expectation for a 6 percent drop, according to chief economist Jan Hatzius.

The firm now sees the unemployment rate rising to 15 percent by mid-year compared with its previous expectation for 9 percent.

A commuter waits for a bus in front of a boarded up store along Michigan Avenue in Chicago. Goldman Sachs now forecasts US GDP will plunge 34% in the second quarter

A commuter waits for a bus in front of a boarded up store along Michigan Avenue in Chicago. Goldman Sachs now forecasts US GDP will plunge 34% in the second quarter

Jobless numbers show an even bigger collapse in output and labor market than Goldman previously expected, which Hatzius wrote ‘raises the specter of more adverse second-round effects on income and spending a bit further down the road.’

The global spread of the novel coronavirus has pummeled economic expectations as many businesses have closed their doors, at least temporarily, as governments around the world ask people to stay at home to curtail further infections.

President Donald Trump said on Monday that federal social distancing guidelines, including discouragement of gatherings larger than 10 people, might be toughened. On Sunday he announced an extension of current restrictions to April 30.

Still, Goldman expects easing monetary and fiscal policy to help contain second-round effects on the economy and to add to growth down the road.’

Goldman cited a much bigger-than-expected phase 3 U.S. fiscal package and forecast a phase 4 package for state fiscal aid, and the likelihood that the Fed would use the $454 billion addition to the Treasury´s Exchange Stabilization Fund aggressively to help credit flow to private-sector and municipal borrowers.

Despite substantial uncertainty, Goldman said lockdowns and social distancing should sharply lower new infections in the next month. 

A worker paints over a boarded up Louis Vuitton storefront on Monday in San Francisco. Goldman Sachs sees the unemployment rate rising to 15 percent by mid-year

A worker paints over a boarded up Louis Vuitton storefront on Monday in San Francisco. Goldman Sachs sees the unemployment rate rising to 15 percent by mid-year

So a slower virus spread and adaptation by businesses and individuals ‘should set the stage for a gradual recovery in output starting in May/June.’

As a result, it raised its expectation for a third-quarter GDP rebound to an annualized jump of 19 percent quarter-over-quarter, up from its previous target of 12 percent growth.

It expects April GDP to be 13 percent below the January and February trend but that the drag then fades gradually by 10 percent each month in the services industry and by 12.5 percent in manufacturing and construction. 

Consumer confidence drops to near a three-year-low as pandemic upends households’ economic outlook

The Conference Board said on Tuesday its consumer confidence index decreased to a reading of 120.0 this month, the lowest since July 2017, from an upwardly revised 132.6 in February. 

Economists polled by Reuters had forecast the index falling to 110.0 in March from the previously reported reading of 130.7 in February.

The Conference Board said it expected further declines as the fallout from the coronavirus, which causes a respiratory illness called COVID-19, intensifies.

‘March’s decline in confidence is more in line with a severe contraction, rather than a temporary shock, and further declines are sure to follow,’ said Lynn Franco, senior director of Economic Indicators at The Conference Board, in a statement.

The survey came in the wake of reports last week showing the number of Americans filing for unemployment benefits racing to a record 3.28 million in the week ending March 21, and business activity hitting an all-time low in March.

 

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