Stocks plunged on Wednesday as deepening concern about the potential economic toll of the coronavirus outbreak and uncertainty over the prospects for federal stimulus pushed Wall Street into bear market territory.
The Dow Jones Industrial Average closed with a loss of 1,466 points, falling 5.9 percent. The S&P 500 index fell 4.9 percent while the Nasdaq composite fell 4.7 percent.
Wednesday’s losses plunged the Dow to 23,553.42 points, 20 percent below its 52-week high of 29,551.42 set on Feb. 12, the threshold for entering a bear market. The S&P index has fallen barely under 20 percent from its 52-week high of 3,386.15 points on Feb. 19.
Investors consider a bear market to be a likely long-term decline in stock prices, typically driven by prolonged economic downturn or widespread financial market troubles. While the financial system has shown few signs of stress amid market volatility, the coronavirus outbreak has raised fears of a sharp economic slowdown or recession.
The World Health Organization (WHO) formally declared the COVID-19 outbreak a pandemic Wednesday, and U.S. public health officials warned that the country should expect a steady rise in confirmed cases and deaths.
As the number of confirmed cases climb, Trump, administration officials and lawmakers in both parties are offering competing economic stimulus plans to protect workers, small and midsize businesses, and distressed industries from the brunt of a coronavirus slowdown.
The House is set to vote Thursday on a package including provisions to provide free virus testing, expand unemployment insurance for those affected, extend paid sick leave for workers forced to stay home and subsidize meals for students who might otherwise go hungry due to school closures.
Even so, Trump and Democrats have disagreed over the scope and details of a package as questions linger about what the president is proposing. Trump said Monday that he would reveal a “major” and “dramatic” stimulus proposal Tuesday, but instead tasked economic adviser Larry Kudlow with sketching the broad outlines of a potential offer.
Stock futures began sinking soon after Kudlow dodged questions on when Trump’s proposal would come out, how big it would be, and when he could sign a potential stimulus plan. He and Trump sought to bolster economic confidence last month as the market tanked, with Kudlow suggesting that investors should consider “buying the dip” on Feb. 28.
The market’s steady decline reflects not only economic dangers for the country, but unique political dangers for Trump. The president has long staked the success of his economic agenda on the torrid rise of stock prices under his watch, blaming previous dips and bouts of volatility on the Federal Reserve or trade policy.
Trump sought to distance himself from the market’s freefall Monday, blaming an oil price war between Russia and Saudi Arabia and media coverage of the coronavirus outbreak for Wall Street’s woes.
“Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News, is the reason for the market drop!” Trump tweeted.