Stocks are falling in early trading on Wall Street Thursday after more reports made clear the worldwide devastation the coronavirus outbreak is causing for the economy.
In the United States, another 3.8 million workers filed for unemployment benefits last week as layoffs continue to hammer the country. In Europe, the region’s economy crumpled by the sharpest degree in at least 25 years.
The dour figures helped send the S&P 500 down 1.1% in the first few minutes of trading. European stocks and Treasury yields were also lower, slamming the brakes on a strong rally that had circled the world a day earlier.
“This is the saddest day for the global economy we have ever seen” in the 50 years that economists at High Frequency Economics have been following economic data, they wrote in a report. “The statistical offices of the economies we watch pumped out 19 economic reports overnight. They revealed historic declines of activity and surging unemployment on a scale we have never seen before. We are sad.”
The Dow Jones Industrial Average was down 338 points, or 1.4%, at 24,295, as of 9:40 a.m. Eastern time, and the Nasdaq was down 0.5%.
Even with Thursday’s losses, the S&P 500 is still on track to close out its best month in decades. Stocks have surged since late March on the promise of massive amounts of aid for the economy and markets from the Federal Reserve and Congress. More recently, some U.S. states and nations around the world have laid out plans to relax restrictions that were meant to slow the spread of the virus but also suffocated businesses and jobs.
Because of that, some investors have essentially written off a horrific few months of corporate profits and economic data, and they’re focusing instead on the prospect of growth returning later this year. The S&P 500 is up 12.7% for April, which would be its best monthly performance since 1987. A day earlier, when optimism was rising about a possible drug treatment for COVID-19, it had been on track for its best month since 1974.
But reports showing the economic pain are just piling ever higher. Besides the jobless figures in the United States, which brought the total to 30 million in just six weeks, data released Thursday showed that consumer spending plunged 7.5% in March from the prior month. That’s crucial because consumer spending makes up 70% of the entire economy.
Among European countries that use the euro currency, the economy shrank by 3.8% in the first three months of the year from the quarter before. That’s the biggest contraction since records began in 1995.
The European Central Bank is promising to support the economy through the pain, and on Thursday it lowered the interest rate on long-term loans it provides to banks. It also offered a raft of new credit lines to banks at a quarter percentage point below its main interest benchmark, which is zero.
European stocks nevertheless dropped. The French CAC 40 fell 1.3%, and the German DAX lost 1.3%. In London, the FTSE 100 dropped 2.3%.
In another sign of caution in the market, the yield on the 10-year Treasury fell to 0.59% from 0.62% late Wednesday. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.
Benchmark U.S. crude oil continued its extreme swings, jumping 14.6% to $17.26 per barrel. It’s still way below the roughly $60 level where it started the year as worries pile up about the effects of a collapse in demand. Brent crude rose 8.5% to $26.27.
