Stock Futures Plunge With Virus Fear Gripping Financial Markets
S&P 500 Futures for June Hit Limit-Down Again Amid Global Rout
(Bloomberg) -- U.S. stock-index futures plunged as much as 5%, triggering exchange rules that limit losses for the third time this week, after President Donald Trump’s measures to combat the spreading coronavirus further rattled financial markets.
Contracts on the S&P 500 expiring in June were down the maximum 5% at 8:42 a.m. in New York, hitting a limit-down band that prevents further losses. Contracts that expire March 20 also hit the exchange-enforced lower limit.
Trump late Wednesday announced a sweeping 30-day ban on travel from Europe excluding the U.K., with the Department of Homeland Security later clarifying that the restriction applies generally to foreigners who’ve been in Europe within 14 days.
“Business activity is going to hit the brakes around the world and stock markets around the world are in freefall as the spread of this deadly pandemic virus has the potential to slow the global economy to a crawl,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “If you’re an investor, keep a safe social distance from the stock market as prices are collapsing.”
Trump also authorized $50 billion for the Small Business Association to extend low-interest loans to companies in affected areas and asked Congress to deliver payroll-tax cuts aimed at boosting take-home pay for working Americans.
The S&P 500’s plunge below 2,700 will likely indicate that investors are pricing in an recession, according to RBC Capital Markets’ Lori Calvasina. During economic recessions going back to 1930s, the S&P 500 has on average posted a 32% peak-to-trough decline. From the S&P’s record three weeks ago, this decline would push the index to 2,302. Calvasins on Thursday cut her year-end earnings and price target for the S&P and now expects the index to finish the year at 3,279.
The S&P 500 fell 4.9% during the cash session Wednesday, briefly dipping 20% below its all-time closing high before barely preserving its bull run. The Dow Jones Industrial Average’s record-long bull run ended. The World Health Organization has now called the coronavirus spread a pandemic.
The MSCI All-Country World Index was set to enter bear market Thursday, down 20% from its record high on Feb. 12, while the Stoxx Europe 600 index sank as much as 7.1%, hitting levels not seen since June 2016. Shares in Air France-KLM were down 10% and Deutsche Lufthansa AG fell 8.7%.
To contact the reporter on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jeremy Herron, John Viljoen
©2020 Bloomberg L.P.