The Dow Jones Industrial Average was down 7.8 percent and over 2,000 points when the market closed on Monday, due to concerns about how the coronavirus would affect the economy and a staggering drop in oil prices. In terms of percentage points, March 9, 2020, was one of the worst single days in the market’s history:
The S&P 500 and the Nasdaq Composite didn’t perform any better, with dips of 7.9 percent and 7.2 percent, respectively. As New York business columnist Josh Barro notes, the sell-off began after a 26-point slide in the price of West Texas Intermediate, the American benchmark price of crude oil:
Oil had already been under pressure as the coronavirus crisis suppressed demand, but this particular price drop was driven by a Saudi announcement that the country will slash the price of the oil it sells and ramp up production. Last week, the “OPEC+” group of oil-producing countries, which includes traditional OPEC members, like Saudi Arabia and Iran, plus Russia, had tried and failed to reach an agreement on a plan to cut oil production in response to the oil-demand slump. Russia resisted the production cut, and now the Saudis — who can produce oil more cheaply than any other country in the world — are trying to squeeze the Russians into agreeing to production cuts by driving down the price. Whether this will ultimately work to prop up oil prices is unclear, and in the meantime the result has been oil prices falling below $30 a barrel.
It was the biggest drop in crude oil prices since the first invasion of Iraq in 1991. If the stock market continues to decline, the longest-ever bull market — beginning 11 years ago in March — will be over. The S&P dipped so fast on Monday morning that it triggered a circuit breaker, ceasing all activity on the New York Stock Exchange for 15 minutes.
To stimulate growth, investors anticipate that the Federal Reserve will cut short-term interest rates by around .75 percentage points at a meeting later this month, though concerns about the full impact of the coronavirus will continue to hinder the economy. Though a recession — defined as two consecutive quarters of negative growth — can still be avoided, New York’s Josh Barro considers a severe economic disruption to be “inevitable,” even if the Trump administration’s handling of the crisis was competent.