The Dow Jones index closed the day’s trading with a loss of 445.41 points, and the S&P 500 fell 62.70 points. The Nasdaq Composite wound up in red territory as well after dropping 122.56 points.
Oil prices, meanwhile, saw a 28-cent increase in value as the US West Texas Intermediate crude traded at $20.39 per barrel. However, Brent crude gave up earlier gains and fell to $28.61 per barrel.
European markets didn’t fare much better at closing. Gripped by fear over the pandemic’s hold on the global economy, all major European indices, such as Germany’s Dax Performance index, the UK’s Financial Times Stock Exchange 100 index and France’s CAC 40 index, closed with about 3% losses.
Investor confidence losses in Europe were largely rooted in the International Monetary Fund’s (IMF) declaration that the pandemic would ultimately cause the worst financial crisis for the global economy in 2020 since the Great Depression.
The Washington, DC-headquartered agency noted in its latest World Economic Outlook release that the global economy was expected to contract this year by 3%, a massive reversal from earlier this year when the agency predicted that growth would outpace 2019 figures and expand the economy by 3.3%.
However, unlike European indices, Asian markets appeared relatively unfazed by the IMF’s conclusions. Japan’s Nikkei 225 index posted an 88.72-point loss for the day, whereas China’s Shanghai index fell by 16.11 points. Hong Kong’s HSI experienced the largest loss of the group, a 290.06-point fall.
Economic Reports Strike Fear in US Investors
The volatile Wednesday session, which earlier saw the Dow plummet over 700 points, saw a massive spike in sell-offs throughout the day after the release of two dismal reports issued by the US Commerce Department and the Federal Reserve.
The Commerce Department report noted that US retail sales plummeted by 8.7% in March, a staggering figure which marks the biggest monthly decline since the US government first began to track such statistics in 1992.
With dozens of retail companies shutting down their businesses to fall in line with stay-at-home and social distancing orders issued by state officials, the report also found that sales at clothing stores dropped by 50%, and that establishments with a focus on home furnishings, sporting goods, electronics or motor vehicles, as well as gasoline stations, saw double-digit percentage declines in sales.
“The economy is almost in free fall,” Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles, told CNBC. “We will see the bottom when the coronavirus infection rates stabilize. It’s going to be a pretty deep bottom from which to come up.”
The Federal Reserve’s report wasn’t great, either. It noted that the total industrial production, the combined output from the US’ manufacturing, mining and utilities industries, fell 5.4% for the month of March as a result of the COVID-19 pandemic.
“Manufacturing output fell 6.3 percent; most major industries posted decreases, with the largest decline registered by motor vehicles and parts,” reads the report. “The decreases for total industrial production and for manufacturing were their largest since January 1946 and February 1946, respectively.”
Diane Swonk, the chief economist at accounting and advisory firm Grant Thornton, told the Wall Street Journal that both reports paint a dark preview of the rest of the year. “We’re in a deep freeze and the chill is bone-chilling,” she said. “That’s what you get in response to a lockdown.”
