Stocks fell sharply on Wednesday as Wall Street begins the second quarter on a sour note amid mounting concerns over the coronavirus outbreak.
President Donald Trump said Tuesday evening the U.S. should prepare for a “very, very painful two weeks” from the rampant coronavirus. White House officials are projecting between 100,000 and 240,000 virus deaths in the U.S.
“This is going to be a rough two-week period,” Trump said at a White House press conference. “When you look at night the kind of death that has been caused by this invisible enemy, it’s incredible.”
Data from ADP and Moody’s Analytics showed U.S. companies cut 27,000 jobs through March 12. Actual losses for the month were far worse, as shown by the record number of jobless claims in the week or March 20. Meanwhile, ISM manufacturing index fell to 49.1 in March from 50.1 in February, signaling a contraction in U.S. manufacturing activity amid the pandemic.
“There’s still tremendous uncertainty,” said Patrick Kaser, portfolio manager at Brandywine Global. “we can look at history as a guidepost for the market and the economy, but there’s not a perfect scenario.”
“In situations like this, the best thing for long-term investors is to figure out what they want longer term,” he said.
Boeing, American Express and United Technologies all fell more than 5% to lead the Dow Industrials lower. The S&P 500 was led lower by the real estate, energy and financial sectors.
On Tuesday, the Dow fell 410 points or 1.8%, while the S&P 500 lost 1.6% to close out their worst first-quarter performances of all time. The Dow fell more than 23% in the first quarter; that was also its biggest quarterly fall since 1987. The S&P 500 fell 20% in the first quarter, its biggest quarterly loss since 2008.
DoubleLine Capital CEO Jeffrey Gundlach said that the coronavirus driven market rout will worsen again in April, taking out the March low.
“The low we hit in the middle of March … I would bet that low will get taken out,” Gundlach said in an investor webcast on Tuesday. “The market has really made it back to a resistance zone. … Take out the low of march and then we’ll get a more enduring low.”
The coronavirus pandemic has caused a nationwide shutdown of the economy, halting business production and leaving millions of American workers unemployed. The unprecedented societal disruption has caused financial distress and volatility never seen before.
“The quarter will be remembered as the fastest and greatest drop in the stock Market for the start of any post-war bear market,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “This reflects the fact that this Bear is the only one cause by a recession which was simply ‘proclaimed’ as leaders announced they were essential shutting down the economy. Since a recession was ensured, the Bear skipped all its normal foreplay and simply went right to the end fully reflecting a recession almost immediately.”
U.S. oil experienced its worst month and quarter in history, losing more than 66% of its value in the first three months of the year. Demand has evaporated due to the coronavirus outbreak and a price war between Saudi Arabia and Russia.
More than 874,000 cases have been confirmed around the world, according to Johns Hopkins University. Of those cases, over 189,000 are in the U.S. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN that he is starting to see “glimmers” that social distancing is helping to lessen the spread of the coronavirus.
However, the sell-off has provided active managers with some opportunities for more active managers and investors, said John Davi, chief investment officer at Astoria Portfolio Advisors.
“The baby is being thrown out with the bathwater,” said Davi. “This is a time I think for stock picking and thematic investors. I don’t think the S&P 500 will move as much because I think there’s gonna be a lot of winners and losers. That’s why I think this is the time for active management.”
— CNBC’s Eustance Huang contributed to this report.
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