Wall Street rebounded on Thursday after falling sharply at the opening bell, when all three major indices plunged into correction as investor fears multiplied that the coronavirus epidemic could spread to the U.S.
Entering correction, which indicates a drop of 10 percent from the 52-week high, has made this the worst week for stocks since the financial crisis.
The Dow Jones Industrial Average was down 350 points by midday, after an earlier decline of 960 points. The S&P 500 and the Nasdaq, which declined by 3 percent in session lows, steadied to losses of just over 1.3 percent each.
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The Centers for Disease Control and Prevention confirmed Wednesday the first community transmission of the coronavirus, in Sacramento County, California. The patient had not traveled to virus-infected areas and was not exposed to anyone who had the virus, the CDC said.
Investors were clearly not assuaged by President Donald Trump’s efforts to ease concerns about the spreading epidemic, which has now killed almost 2,800 people around the world. In a news conference on Wednesday night, Trump said his administration has the situation under control and is “ready to adapt” if the virus spreads.
While Trump acknowledged that markets had fallen this week because of coronavirus fears, he said Wednesday that he believed the plunge was likely also due to “the Democrat candidates standing on the stage making fools out of themselves.”
Several Wall Street analyst firms issued dire forecasts for 2020 revenues, with Bank of America slashing its annual outlook from 3.1 percent global growth to 2.8 percent, a level last seen in 2009, and Goldman Sachs saying U.S. companies will see zero growth this year due to the epidemic.
“U.S. companies will generate no earnings growth in 2020,” the firm wrote in a note to clients on Thursday. “We have updated our earnings model to incorporate the likelihood that the virus becomes widespread.”
Former Federal Reserve Chair Janet Yellen said Wednesday the virus could push the U.S. into a recession.
“It is just conceivable that it could throw the United States into a recession,” Yellen said Wednesday at an event held by the Brookings Institution. “Market participants will look to the Fed to provide some support,” she noted. “The Fed does have some scope — but it will provide a little bit of support to consumer spending and to the U.S. economy and for financial markets.
“We’ve hit a pocket of fear,” Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, told CNBC. “We could be in trouble because, let’s face it, the U.S. consumer is what’s holding this thing together.”
