(Bloomberg) --
U.S. stocks extended declines as pessimism took hold after a brief respite when the Federal Reserve expanded plans to buy government bonds and alleviate what it called “temporary disruptions” in financing markets.
The S&P 500 Index tumbled about 7% after paring losses to as low as 3% in the immediate aftermath of the Fed’s announcement. Ten-year Treasury yields declined as the Fed’s announcement recalled the quantitative easing it used during the financial crisis. Oil slumped along with gold. European stocks tumbled 11% in a record rout.
Investors are trying to guess at the effectiveness of policy makers’ measures to curb the spread of the coronavirus and limit its economic damage after President Donald Trump’s travel ban and tepid fiscal measures failed to impress most observers. The European Central Bank couldn’t stem the rout after it left rates unchanged, though it temporarily increased its bond buying program and took steps to boost liquidity.
“We need to see what is effectively a ‘declaration of war’ against the virus and full support to offset the economic damage that war will cost,” said Peter Tchir, head of macro strategy at Academy Securities LLC. “Whatever has gone on this week, it’s not a liquidity crunch.”
On another bruising day across markets:
- The S&P 500, Nasdaq Composite and Nasdaq 100 indexes sank deeper into a bear market, with losses from February closing records extending well past 20%.
- The slump triggered the second 15-minute trading halt this week shortly after the U.S. open.
- The MSCI All-Country World Index extended losses to enter bear-market territory.
- The Stoxx Europe 600 tumbled the most on record, with trading volumes more than double the 100-day average. The cost of insuring debt issued by Europe’s investment grade companies surged to the highest since 2013.
- Japanese stocks closed more than 4% lower even after another liquidity pledge from the country’s central bank. Australian shares were among the worst performing worldwide, sinking deeper into a bear market despite a stimulus plan there. India’s benchmark fell more than 8%.
- Oil extended losses toward 5%. Bitcoin slumped. Gold fell below $1,600 an ounce.
“Market moves suggest monetary stimulus has reached its limits,” said Lucas Bouwhuis, a portfolio manager at Achmea Investment. “Most of the stimulus needs to come from the fiscal side and we are just not seeing enough of that yet.”
Meanwhile, signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety.
“The risks have definitely risen,” said Chris Gaffney, president of world markets at TIAA. “The question is how long will this last and I don’t think anybody can predict that at this point.”
These are the main moves in markets:
Stocks
- The S&P 500 Index declined 7.4% as of 1:41 p.m. New York time.
- The Stoxx Europe 600 Index fell 11%.
- The MSCI Asia Pacific Index dipped 5.4%.
- The MSCI Emerging Market Index sank 6.4%.
- The Bloomberg Dollar Spot Index gained 1.1%.
- The euro weakened 0.8% $1.1184.
- The Japanese yen fell 0.9% to 105.53 per dollar.
- The yield on 10-year Treasuries sank 16 basis points to 0.71%.
- Germany’s 10-year yield fell one basis point to -0.75%.
- Britain’s 10-year yield declined three basis points to 0.26%.
- West Texas Intermediate crude declined 5.3% to $31.24 a barrel.
- Gold weakened 2.7% to $1,590.75 an ounce.