Stocks fall, limiting Wall Street's worst quarter since 2008
NEW YORK: Shares fell on Tuesday to close Wall Street's worst quarter since the most distressing days of the 2008 financial crisis.
butbenchmarku.s.crudeoildroppedbyroughlytwothirdsthisquarteronexpectationsthataweakenedeconomywillneedlessfuel.theyieldonthe10-yeartreasurydroppedbelow1%forthefirsttimeasinvestorsscrambledforsafety,anditendedthequarteratroughly0.67%.germany's DAX lost a quarter of its value, and South Korean stocks fell just over 20%.
The big question is whether the markets will worsen. At this point, no one knows.
People are trying to digest the length and magnitude of the coronavirus impact, said George Rusnak, managing director of investment strategy at Wells Fargo Private Bank.
The steep drops from Tokyo to Toronto in recent weeks reflect investors' understanding that the economy and corporate profits are in for a sudden, debilitating drop-off. Economies around the world are grinding to near standstills as businesses close their doors and people hunker down at home in hopes of slowing the spread of the virus.
But markets have also cut their losses in recent weeks on hopes that massive aid from governments and central banks around the world can blunt the blow. The S&P 500 was down nearly 31% for the quarter at one point, but it has climbed 15.5% since last Monday.
The Fed has promised to buy as many Treasurys as it takes to get lending markets working smoothly after trading got snarled in markets that help companies borrow short-term cash to make payroll, homebuyers get mortgages and local governments to build infrastructure. Congress, meanwhile, approved a $2.2 trillion rescue plan for the economy , and leaders are already discussing the possibility of another round of aid.
It is impossible to say whether the markets have really bottomed or whether investors have become overly optimistic about the economic rebound that will come after the spikes in the viral outbreak without knowing when the number of new infections will peak.
We are on this little historic journey with the markets, said chief investment strategist at Northwestern Mutual Wealth Management Co. First, we put the economic plan into action, then we need to start seeing some of the containment actions pay off. At some point it will be how we will get back to work.
Among the next milestones for investors is Friday's jobs report, which is expected to show a sharp drop in payrolls. The companies will also report their first-quarter earnings results in the coming weeks, and analysts are looking for the biggest drop in earnings since early 2016, according to FactSet.
The numbers may worsen in the following quarter.
Goldman Sachs economists said Tuesday they expect the U.S. economy to shrink 34% in the second quarter, but they expect growth to rebound in the third quarter.