Stocks at Risk of Tripping Circuit Breakers as Rout Resumes

(Bloomberg) -- Volatility continues to roil U.S. equity markets, with premarket trading indicating the S&P 500 is likely to trigger a market-wide trading halt for the second time in three days.

An exchange-mandated circuit breaker will stop action for 15 minutes if the S&P 500 falls 7% from its Tuesday close after markets open at 9:30 a.m. in New York. The biggest exchange-traded fund that tracks the U.S. equity benchmark plunged 6.9% in early trading. Futures on the index sank 4.8% overnight before hitting levels that prevent further losses.

Another 15-minute pause would occur should S&P losses reach 13% following a resumption in trading. Such a drop would put the index at 2,200.40. If the drop hits 20%, markets would close for the day.

Governments are finally getting the message that they’ll have to run exponentially bigger budget deficits to stay afloat as the coronavirus brings the world economy to a sudden halt.

Even as governments and central banks kickstart emergency measures to contain market stress from the coronavirus outbreak, key gauges have deteriorated almost as fast as the post-Lehman tumult.

“I’ve been calling this a monster mashup of 1987, 9/11 and the 2008 financial crisis,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “There’s so much more of the day-to-day trading volume done by trading algorithms so that makes the moves much more dramatic. That helps explain why the swings have been so huge.”

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