Stocks plunge most since financial crisis

U.S. stocks plunged more than 7.5% in the worst day on Wall Street since the financial crisis, as a full-blown oil price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, crude sank 20% and credit markets buckled.

The S&P 500 sank the most since December 2008, the Dow Jones Industrial Average tumbled 2,000 points and small caps lost more than 9% as investors fled risk assets with virus cases surging and the Trump administration so far unwilling to step in to soften the expected economic blow.

In a dramatic day across assets globally, all but nine S&P 500 companies were lower Monday, with energy producers routed by 20%. Exxon Mobil and Chevron were down more than 12%. Banks lost 11%, with an ETF that tracks regional banks had for its worst day since 2009. Apple sank 7.9% and Dow Chemical plunged 22%.

The rout began at the open, with losses reaching 7% four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes. The measure is down almost 19% from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day. Crude tumbled the most since the Gulf War in 1991, after an OPEC+ alliance that had contained global production disintegrated. [More: Market dive puts advisers on the offensive] The 10-year Treasury yield fell below 0.5% before climbing back to 0.57%, and the 30-year yield dropped under 0.9%, taking the whole U.S. yield curve below 1% for the first time in history. A U.S. derivatives index that measures the perceived risk of corporate credit surged by the most since Lehman Brothers collapsed. The oil-price crash threatened to upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home. Investors are clamoring for some policy response from the Trump administration, which has so far signaled that it believes the spread is under control. [More: Vanguard: Fed rate cut a 'high-risk bet'] 

“The market was poised and vulnerable to this volatility and crude oil has just exacerbated it,” said Randy Frederick, vice president of trading and derivatives for Schwab Center for Financial Research. “The coronavirus itself has been the main cause of the correction, but now it’s being exaggerated even further.”

President Donald Trump and his economic team will weigh measures later Monday to contain the fallout from coronavirus and a sudden crash in oil prices, with funding for a temporary expansion of paid sick leave and aid for battered U.S. energy producers among possible steps.

“When there’s panic, there tends not to be accurate pricing of assets,” said Kristina Hooper, Invesco’s chief global market strategist. “The sell-off today to me is emblematic of that. It really is a knee-jerk reaction to what’s happened over the weekend."