The Dow Jones Industrial Average crossed into bear territory on Wednesday, which is defined as falling 20 percent below its most recent high. The index eased 5.9 percent, erasing all of Tuesday’s gains and causing analysts to question whether the declines will continue now that this psychological barrier has been crossed.
The S&P 500 crossed briefly into bear territory on Wednesday before bouncing slightly. The index closed down 4.9 percent, while the Nasdaq Composite closed down 4.7 percent. All three major indexes are expected to open lower on Thursday after U.S. President Donald Trump announced that U.S. travel will be closed to 26 countries starting Friday, for at least 30 days.
Minutes after the Dow ended its historic 11-year bull run, the New York Federal Reserve announced that it would be injecting tens of billions of dollars into the financial system and increasing its overnight repo operations. The Fed will now be offering $175 billion in its daily repo operations.
In a speech from the Oval Office, Trump also said that he would be working on financial stimulus packages to help individuals and businesses weather these difficult economic times. Few details were given about what his plan entailed, which did little to restore trader optimism. Also on Wednesday, Italian Prime Minister Giuseppe Conte announced that all of Italy’s stores except pharmacies and groceries will be shuttered in an effort to control the spread of the virus that has taken the country by storm. Despite the drastic measure of this decision, the move was largely seen as a positive step in containing the damage.
As a spot of good news, new diagnoses in China on Wednesday fell to lows not seen since the start of the outbreak. On the other hand, cases around the world have spiked, causing panic around the world and requiring global leaders to take drastic measures to contain the outbreak. These measures, such as canceling flights, schools, and public gatherings, are likely to have long-term economic ramifications. Likewise, the crash of global stock markets has erased billions of dollars of global wealth and is likely to cause a pullback in consumer spending, which is expected to cause a rise in unemployment. Simply put, despite the fact that China is slowly returning to business as usual, there is expected to be a long recovery period on the horizon.
Oil futures were down significantly on Thursday afternoon in Asia on concerns that a decline in flights to and from the U.S. would reduce demand further. U.S. WTI futures sunk 4.15 percent to $31.61 per barrel, and Brent crude futures eased 4.39 percent to $34.22 per barrel.
The oil markets have been specifically tumultuous in recent days due to tensions between OPEC and Russia and the additional decrease in demand will do little to solve the problem of oversupply. Optimism sent oil prices higher on Wednesday, but quickly faded after Trump’s announcement.