Dow falls 350 points Friday to cap the worst week for Wall Street since the financial crisis

Stuart Frankel's Steve Grasso explains his investment strategy amid sell-off
Stuart Frankel's Steve Grasso explains his investment strategy amid sell-off

Stocks tumbled once again on Friday, capping off their worst week since the financial crisis, as worries over the coronavirus and its impact on the economy continue to rattle investor sentiment.

The Dow Jones Industrial Average dropped 357.28 points, or more than 1%, to 25,409.36. The 30-stock Dow briefly fell more than 1,000 points then rallied into the close in a wild trading session characteristic of the week. The S&P 500 slid 0.8% to 2,954.22. The Nasdaq Composite closed flat at 8,567.37 but fell as much as 3.5% on the day.

For the week, the Dow fell more than 12% — its biggest weekly percentage loss since 2008. On a points basis, the Dow fell more than 3,500 points, far and away its largest weekly point loss ever. It also ended the week in correction territory, down 14.1% from an intraday record high set Feb. 12. The S&P 500 lost 11.5% week to date in its worst weekly performance since the crisis. The U.S. stock benchmark is off about 13% from its high notched just last week. The Nasdaq lost 10.5% this week and was nearly 13% below a record high.

"The reason it happened so quickly is because the momentum going up was so great," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "The hedge funds, the algorithmic trading, the quants: They play on momentum."

A pledge by the Federal Reserve late Friday eased the market's pain slightly into the close. Fed Chairman Jerome Powell said in a statement the central bank will "act as appropriate" to support the economy amid the coronavirus outbreak.

"What we have right now is a very scary global health scare, that has caused complex supply chains to stall," said Art Hogan, chief market strategist at National Securities. "As such we have a supply shock currently. Easier monetary policy could help if we were to evolve into a demand shock with the economic damage that follows the path of COVID-19. Rate cuts are not only the wrong prescription for what ails the economy right now, they are bad medicine longer term since they could raise prices without a supply response."

Yields plunge

The major averages were under pressure on Friday in part because investors kept adding to their bond-market exposure and fleeing equities. The benchmark U.S. 10-year Treasury yield touched a fresh record low. It was last at 1.14%. Yields move inversely to prices.

Among the latest coronavirus headlines the market was responding to, a Google employee tested positive for the coronavirus, the company said Friday. New Zealand and Nigeria reported overnight their first coronavirus cases. South Korea, meanwhile, confirmed more than 500 new cases. China reported 327 additional cases.

Boeing and JPMorgan Chase were the biggest decliners in the Dow on Friday, dropping more than 4% each. Apple slid 0.1% but briefly entered bear market territory.

The Cboe Volatility Index, also known as Wall Street's so-called fear gauge, hit a high of 49.48, its highest level since February 2018. It last traded around 40.

"People have been so preconditioned to buy the dip and to always expect the market to recover that people can get smacked around with moves like this," said Patrick Hennessy, head trader at IPS Strategic Capital. "No one knows how this thing ends."

Travel stocks Norwegian Cruise Line and American Airlines were among the worst-performing S&P 500 stocks this week, dropping more than 20% in that time. Las Vegas Sands lost more than 10% in that time. Regeneron Pharmaceuticals and Qorvo were the only S&P 500 components to end the week higher.

"The timing of this was just the worst with respect to investor sentiment being elevated," said Doug Ramsey, chief investment officer at The Leuthold Group, referring to the coronavirus outbreak. "I'm not sure that the market has really priced in the potential economic impact of this."

Concerns over the coronavirus have also led several companies to issue earnings and revenue warnings. Microsoft said Wednesday one of its key divisions may not meet the company's previous revenue guidance. PayPal also warned about its outlook on Thursday.

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