Dow Breaks Below 20,000 As Wall Street Gets Routed Again

Like the movie Groundhog Day, every day now seems to be a repeat of the previous one when it comes to the markets

Bad news followed by bad news followed by more bad news.

Yesterday saw the market drop yet again, this time with the Dow Jones Industrial Average slipping 6.3% to close below 20,000 for the first time since February 2017. The S&P 500 dropped 5.18% and the Nasdaq fell 4.7%.

And while the size of the loss didn’t set any records like previous days, it does mean that the market has officially given up all the gains it has made since President Trump took office.

At one point yesterday the S&P fell by more than 7%, triggering the circuit breakers put in place to prevent extreme losses and halting trading for 15 minutes. This was the second time in three days the markets were halted.

According to data from Yahoo Finance, the Dow has moved more than 1,000 points higher or lower during trading for eight straight days and 11 times over the last month.

Relief may be on the way, as last night President Trump signed the Families First Coronavirus Response Act, a bill that will provide paid leave for people in industries most affected by the coronavirus outbreak as well free testing. as lawmakers and the Trump administration already are looking ahead to other, broader measures that could stimulate the U.S. economy and help workers.

The Trump administration is also working on a more comprehensive stimulus package that could provide up to $1 trillion in relief for Americans and industries like airlines that have been particularly affected by the virus.

The European Central Bank has announced a 750 billion euro ($818 billion) stimulus package to help provide some relief for countries as Europe grapples with the coronavirus as well.

In a statement, ECB President Christine Lagarde said “Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.”

Here in the US, oil had its third-worst day on record, dropping 24.4% and closing at an 18-year low of $20.37 per barrel. Oil is facing both a shortage in demand and an increase in supply.

Stephen Innes, chief market strategist at AxiCorp, said in a note to clients:

“Even if global production remains static over the near term, let alone factoring in Saudi Arabia increased supply, inventories will swell as gas and oil demand drops precipitously in the weeks ahead of when physical storage facilities are filled to the brim around the world.”

He added “In this situation, it’s unclear if a point of equilibrium even fits into this scenario. As once the swift and savage physical rebalancing takes place, the markets could quickly fall to WTI $15 or even further, which is now becoming the base case for some.”