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“This week feels like it’s lasted about 30 days.”
Tim Courtney, chief investment officer at Exencial Wealth Advisors in Oklahoma City, spoke for everyone who rode the markets in its most volatile stretch.
This was a week of escalation. Of the coronavirus and the countermeasures. Of the economic hit and the policy response. Of investor fear and market stress. In the space of six days, warning lights flashed in the deepest recesses of global markets, a decade’s worth of monetary action, and a scramble for liquid assets surpassing any that went before.
Drawing from coverage across the Bloomberg News markets team, this is the story of the chaos that unfolded on Wall Street and beyond.
Shock, No Awe
Sunday 15 March: By about 5 p.m. in New York on Sunday it’s already clear: It will be another historic week in markets.
Just as trading was resuming, the Federal Reserve >stuns everyone with another emergency rate cut and a promise to boost its bond holdings by hundreds of billions of dollars.
The move is a shock and it’s meant to be. The Fed is trying to protect the world’s largest economy from the impact of a pandemic that has already started to shut down vast swaths of industry and commerce. It also wants to ease stresses that have been rising in various corners and which, if ignored, can spiral out of control with dire consequences for the real economy.
This huge move of policy support should be well timed for investors. U.S. stocks just posted one of their best days in >more than a decade, a dramatic bounce spurred by President Donald Trump’s press conference on March 13 where he detailed plans to fight the virus.
The only trouble is, we have seen these rallies before, and they are often a signal of misfiring markets as much as anything else. The last such surge was in October 2008.
So investors are already nervous. The massive emergency action feeds into the unease as market players wonder what central bankers know that they don’t. In the New York evening as trading begins, S&P 500 futures tank. They hit their lower trading curbs once again and don’t come back.
The nerves feed into the currency market and that reliable old haven, the Japanese yen, strengthens. The New Zealand dollar slides after its central bank also slashes rates. In the bond market, Treasury futures predictably surge.
Monday 16 March: S&P 500 futures have dropped by as much as they are allowed under the rules that prevent outsize moves at times of low liquidity. So like last week, investors turn to the exchange-traded fund that tracks the benchmark, which trades in the pre-market without limits.
It doesn’t> look good.
Monetary and government officials are pledging action left and right. The central bank moves are >coordinated. The International Monetary Fund says it’s ready to mobilize its >$1 trillion lending capacity to help nations counter the coronavirus. And none of it seems to be enough.
Stocks are down heavily in Europe and Asia. When the cash market opens on Wall Street, the trading halt for the S&P 500 is >nearly instantaneous as the gauge plunges 8.1% -- falling so fast it goes beyond the 7% mark where the halt should kick in. Fewer than 100 shares actually manage to trade in that instant. When the 15-minute circuit breaker ends, the losses mount. The S&P 500 will end 12% lower.