The stock market had its worst day since April 1 yesterday, with the Dow Jones Industrial Average closing down 445 points, or 1.86%. The S&P 500 fell 2.20% and the Nasdaq slipped 1.44% as historically bad economic data and plunging bank earnings surprised the stock market.
Retail sales in March slid a record 8.7%. This has been the largest one-month drop since the Commerce Department started keeping track in 1992.
Quincy Krosby, chief market strategist at Prudential Financial, is worried the retail sales report could be the canary in the coalmine for the overall economy.
“If this is a precursor to what we can expect throughout the U.S. … there’s no word for it. This reflects the complete shutdown of the economy.”
The Empire State Manufacturing Index fell to -78.2, the lowest reading ever for the index. It is also dramatically lower than the -34.3 reading during the worst part of the Great Recession.
Adding to the misery, industrial production fell 5.4%, its largest decline since 1946, and manufacturing was down 6.3%.
What’s Going to Happen to the Stock Market?
Like Krosby, Peter Cardillo, the chief market economist at Spartan Capital Securities, says today’s reports indicate more trouble ahead.
“This points to a very severe recession because this is just the beginning of a series. The consumer’s not spending.”
Added Chris Rupkey, chief financial economist at MUFG Union Bank, “The economy is clearly in ruins here. Nobody is buying cars, down 25.6%, nobody is buying furniture, down 26.8%, and eating and drinking places were down 26.5%.”
Banks have kicked off earnings season, and there hasn’t been much good news to share so far. JPMorgan Chase said that profits fell 69% and Wells Fargo earned only a penny per share.
Yesterday, Bank of America (NYSE: BAC) fell 6.49%. This took place after it reported that profits fell 45% last quarter and that loan losses and low interest rates will continue to hurt the bank.
Citigroup (NYSE: C) saw profits fall 46% in the first quarter. Additionally, it said it will have to increase loan-loss reserves by $4.9 billion to offset expected losses due to the coronavirus.
Shares of struggling retailer JCPenney fell almost 30% as the company announced that it is exploring bankruptcy options.
Setback After Setback
And oil continues to plunge, despite the additional production cuts scheduled to start May 1. West Texas Intermediate crude, the US benchmark, fell to its lowest level since early 2002 yesterday, closing at $19.87 per barrel.
The drop was due to a report from the U.S. Energy Information Administration that crude inventory hit a record 19.2 million barrels for the week ending April 10. The IEA also said that demand could fall by another 29 million barrels per day in April. This figure is potentially its lowest level in 25 years.
With all this bad news coming in a single day, JJ Kinahan, chief market strategist at TD Ameritrade, sums it up.
“Yesterday, the market was still hearing what it wanted to hear, whereas today more like: ‘Here’s what’s actually going on.”