The Dow Jones Industrial Average entered a bear market Wednesday after plunging intraday nearly 6% to 23,553, and more than 20% from the all-time high it reached just last month. The S&P 500, which temporarily touched a 20% loss from its Feb. 19 high, closed down 4.6% to 2,741, while Nasdaq fell 4.7% to 7,952. A bear market is a drop of 20% or more below its most recent closing high.
Wednesday’s losses accelerated after health authorities officially declared COVID-19 as a global pandemic, bringing the U.S. equities market to the brink of ending one of its greatest-ever runs that began on March 9, 2009.
“There is still a tremendous amount of uncertainty surrounding the impact from coronavirus, and jittery investors continue to digest the information flow as it becomes available,” Charlie Ripley, senior investment strategist for Allianz Investment Management said Wednesday. “The gloomy tone in the market today displays disappointment from investors regarding the delayed fiscal response from the government.”
Market participants were further rattled after a Reuters report suggested that the Trump administration had ordered top-level coronavirus meetings to be classified.
As the coronavirus spreads, analysts expect recessionary fears to significantly impact corporate earnings. Goldman Sachs (GS) chief equity analyst David Kostin predicted the S&P 500 tanking more than 10% below its current 2,450 level.
As bearish as it may sound, the fact is that a global recession seems a matter of when not if at this point. After all, the loss of economic potential from the coronavirus shock is now a certainty.