SP 500 heads for biggest ever first-quarter plunge

April 01
11:28 2020

Wall Street’s major indexes fell on Tuesday and the S&P 500 was headed for a record first-quarter decline on growing evidence of large-scale economic damage from the coronavirus pandemic.

In one of the fastest turns into a bear market, the S&P 500 indexes and the Dow Jones Industrial average were set to end the quarter more than 20% below their levels at the start of the year, as the health crisis worsened in the United States and brought business activity to a standstill.

The real estate and utilities sectors were among the biggest decliners on Tuesday, following a recent rally driven by investors seeking stocks likely to weather an economic slump.

An unprecedented round of fiscal and monetary stimulus had helped equity markets stabilize recently following wild swings that saw the benchmark S&P 500 rise 9% and slump 12% in two consecutive sessions. With economists slashing 2020 growth expectations, investors fear corporate defaults and more mass layoffs would lead to a deep and lasting global recession.

“Hopefully today, outside of any stirring event that’s going to take place, we have a little bit more of a stable performance where the high and the low’s not going to be more than 2%,” said Steven DeSanctis, a strategist at Jefferies.

But the relative calm may not last as many investors were likely being cautious ahead of the release of data on jobless claims on Thursday and the release of the March non-farm payroll report on Friday.

“We’re leading into the end of the week that’s going to have more of the fireworks,” said DeSanctis.

The Dow Jones Industrial Average fell 313.21 points, or 1.4%, to 22,014.27, the S&P 500 lost 39.15 points, or 1.49%, to 2,587.5 and the Nasdaq Composite dropped 77.74 points, or 1%, to 7,696.41.

The blue-chip Dow is on course for its biggest quarterly percentage decline since 1987, while the tech-heavy Nasdaq is set for its worst three months since 2018.

The energy index rose nearly 2%, boosted by a rebound in prices from 18-year lows after the United States and Russia agreed to discuss stabilizing energy markets. [O/R]

“The rebound in oil has been a driver for energy. Here’s a group that has had a tough go of it,” said DeSanctis.

The sector has lost about half its value this year from the double whammy of the coronavirus and the Russia-Saudi Arabia price war, forcing refiners to cut production and join a slate of U.S. firms looking to raise cash as liquidity evaporated.

The biggest decliners on Tuesday were real estate, down 4%, utilities , down almost 3% and financials , down around 2%.

“We’ve seen some of the more defensive areas like real estate and utilities recently start to underperform as people trying to take on a little more risk as they’re slowly creeping out of the defensive stocks and into the more cyclical groups” said DeSanctis.

Technology stocks bounced between gains and losses on the day and were last down 0.7%.

Declining issues outnumbered advancing ones on the NYSE by a 1.08-to-1 ratio; on Nasdaq, a 1.16-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and no new lows; the Nasdaq Composite recorded 12 new highs and 33 new lows.

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