by Revanth Rao
In response to the growing worldwide coronavirus panic, as well as concerns over the price of oil and the yield curve on bonds, the New York Stock Exchange plummeted on Mar. 9, with the Nasdaq, Dow Jones, and S&P 500 all falling over seven percent. Following discussions in Washington, D.C. on ways to remedy the economy, the stock market rebounded the next day, but stocks again plunged in the days following.
The continuing coronavirus outbreak caused the stock market plunge, the worst since the 2008 recession. The spread of COVID-19 to the United States led investors to believe that consumer activity could decrease, hurting the economy. Also affected by the coronavirus was the state of global oil, as shutdowns of Chinese factories and a dip in global tourism and traveling due to fears regarding COVID-19 decreased the demand for oil. In response, the Organization of Petroleum Exporting Countries (OPEC+) attempted to intervene, asking Saudi Arabia and Russia, two preeminent oil exporters, to lower their production of oil to keep prices stable. However, Russia instead lowered oil prices to make their oil more appealing, and Saudi Arabia followed suit. This caused oil future stocks to collapse, tanking the stock market; at one point, the decline activated a circuit breaker, which halted trading for 15 minutes in an effort to prevent a full-blown crash.
The following day, markets rebounded after President Trump held discussions over the suspension of a payroll tax. If removed, the tax, charged to both employers and employees, would put more money in the pockets of Americans, presumably increasing spending and improving the economy, leaving investors hopeful for the future.
However, the gains were promptly erased in a day due to both a lack of tangible action to combat the virus from the president and the World Health Organization officially declaring the coronavirus a global pandemic.
On Mar. 12, after Trump gave a speech in which he suspended travel between the United States and Europe for 30 days, the stock market took another tumble, with the Dow Jones falling ten percent and the Nasdaq and the S&P 500 each falling nine percent. To put the fall in perspective, on Feb. 12, the Dow was up 61 percent since Trump’s election victory in Nov. 2016; a month later, the Dow was up just 11 percent since Nov. 2016.
While the downfall of the stock market seems abrupt, it was likely already due for a correction in the near future, regardless of the coronavirus. According to the New York Times, 2019 was the best year for the stock market in over 20 years, and after such years, the market tends to regress. However, the coronavirus threw a wrench into the stock market, creating a crisis that will continue to persist for the foreseeable future.
(Sources: Business Insider, WaPo, NYT, NBC News)