By Kim Khan
Investing.com – Wall Street plunged Thursday as the coronavirus-led volatility continued and bond yields set record lows yet again.
The S&P 500 sank 3.4%, while the Nasdaq Composite fell 3.1%.
The Dow Jones Industrial Average closed down 3.6%, shedding 969 points.
The one-day-surge-one-day-plunge action is more evidence that Wall Street is still in the dark about how much impact Covid-19 will have on economic activity and corporate bottom lines.
California declared a state of emergency as the number of U.S. and global confirmed cases grew, while the Trump Administration said it would fall well short of its promise to have 1 million Covid-19 tests ready by the end of the week.
But investors seemed more shaken by domestic carrier Southwest Airlines (NYSE:LUV), which warned on first-quarter sales. Although other airlines have warned and canceled flights due to low demand, the hope had been the effects would be more concentrated on international carriers.
Southwest closed down 3.6%.
Dow component Boeing (NYSE:BA) fell 8%, taking more than 156 points off the Dow, on worries that plane orders could be delayed or canceled as the airline industry struggles.
Bonds rallied as money bounced back into safety and away from risk, sending the 10-Year Treasury Yield to a record low of 0.899% intraday, below 0.9% for the first time.
Although financials usually do well when yields fall, narrowing net interest margin, that benefit “is more than offset by the sharp drop in the overall levels of yields” and “weakening economic conditions can pressure the credit quality of banks’ loan books,” Allianz’s Mohamed El-Erian tweeted.
The financial sector was one of the worst performers of the day.
Also struggling were energy stocks, as oil prices dropped 2%. OPEC said it would like to cut production by a further 1.5 million bpd, but Russia has yet to agree.