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Dow’s bull market brought low by the coronavirus

Declaration of a pandemic sends stocks tumbling and puts benchmark index into bear-market territory

The speed at which the stock market went from all-time high in a bull market to bear-market territory set a record.Andy Wong/Associated Press

The coronoavirus has brought the 11-year bull market for the Dow Jones industrial average to an end, as fears of an extended disruption to businesses and the economy sent stocks tumbling Wednesday and shoved the world’s mostly widely watched index into bear-market territory.

Continuing a run of tumultuous trading sessions, the Dow fell 1,464.94 points, or 5.9 percent, with the slide gaining momentum after the World Health Organization declared the viral outbreak a pandemic that is likely to hit every country in the world.

The sell-off left the 30-stock Dow at 23,553.22, a 20.3 percent drop from the record high reached Feb. 12. A bear market is defined as a peak-to-trough decline of 20 percent or more.


The broader Standard & Poor’s 500 index fell 4.9 percent to 2,741.38, just avoiding a bear market with a 19 percent loss since its Feb. 19 all-time high.

Stocks resumed falling in Asia Thursday morning and US equity futures dropped after President Trump suspended all travel from Europe, excluding Britain, for 30 days starting Friday. The ban doesn’t apply to US residents and certain others.

The bear-market designation is arbitrary, but the milestone will nevertheless weigh on investor confidence amid all the uncertainty created by the coronavirus illness, known as Covid-19. And while not every bear market is accompanied by a recession, a continuation of the market’s slide will add further pressure to the economy if businesses and consumers respond by hunkering down.

“Until the growth rate [of Covid-19 cases] peaks, the market won’t really get a handle on how bad it gets,” said Jurrien Timmer, director of global macro at Fidelity Investments in Boston.

The onset of a bear market and recession fears will no doubt become an issue in the 2020 presidential campaign. Trump has been running on the strength of the economy and frequently points to the stock market as a sign of his success. The unexpected ban on travelers from Europe will only complicate the conduct the global business and trade. Trump said in his speech that cargo from the Continent would also be restricted, but he later said on Twitter that was not the case.


The stock market has been on a roller coaster ride since mid-February, when Covid-19 cases started surging outside of China, where it initially emerged. It’s been about a week since the crisis gripped the United States, and stocks have fallen almost consistently since then.

In addition to the European travel restrictions, Trump used an address to the nation Wednesday night to say he was directing agencies to provide unspecified financial relief for “for workers who are ill, quarantined, or caring for others due to coronavirus."

Trump said the government will will defer tax payments for some individual and business filers for three months to lessen the impacts of the virus outbreak. He said the Small Business Administration will also make low-interest loans available to businesses.

“This is not a financial crisis,” he said. “This is just a temporary moment of time that we will overcome together as a nation and as a world.”

Trump also reiterated his call to Congress to cut the federal payroll tax in order to stimulate the economy.

“We need fiscal stimulus,” Diane Swonk, chief economist at Grant Thornton, said before the president spoke. “There’s no way around it.”


The news on Wednesday only reinforced that more disruption to daily life and work was on the way.

“We expect to see the number of cases, the number of deaths, and the number of affected countries climb even higher," said Tedros Adhanom Ghebreyesus, director general of the WHO.

Among other unsettling developments: Italy ordered all but essential businesses to close, the NCAA said its March Madness basketball tournament games would be played without fans, and local businesses including Bain Capital and Wayfair told most employees to work from home.

Stock prices are falling because investors are lowering their expectations for corporate earnings. Valuations started the year at elevated levels, on the assumption the economy would remain healthy and interest rates low. Goldman Sachs now estimates that corporate earnings will decline 5 percent in 2020.

For investors, the collapse of oil prices over the weekend is another factor driving stocks lower. OPEC and Russia, unable to agree on production cuts to offset a drop in crude demand, started a price war that will wreak havoc on US oil producers. The damage to the energy sector and its suppliers from sharply lower prices may outweigh the benefits to consumers and industrial users.

“This oil thing is really troubling,” said Cathy Minehan, former president of the Federal Reserve Bank of Boston. “Oil is a big part of the US economy.”

The speed of the meltdown has been breathtaking. The Dow went from peak to bear market in 19 trading days, a record.


Among the largest stocks in Massachusetts, Thermo Fisher dropped 6 percent, General Electric lost 7 percent, and Raytheon shed 9.5 percent.

Even with the recent bloodbath, the Dow has more than tripled since the beginning of the bull market, and the S&P 500 index has more than quadrupled.

Financial expert say individual investors should stick with their investment plans.

“The thing not to freak out about is the stock market," Minehan said. "It’s reflecting short-term sentiment. It will go up and down.”

Shirley Leung of the Globe staff contributed to this report. Material from Associated Press was also used.

Larry Edelman can be reached at Follow him @GlobeNewsEd.