The Dow Jones Industrial Average plummeted to the opening bell on Monday, plummeting more than 1,800 points as a fight against crude oil production has put added pressure on a global economy already suffering from the effects of the epidemic. of coronavirus.
A few minutes after the opening bell, the S&P 500 plunged 7%, triggering a “circuit breaker” which interrupted all exchanges for 15 minutes.
Traders had anticipated a bloodbath on Monday after oil prices crashed 30% overnight, pushing the top three averages down about 5%.
Investors took refuge in safe places, pushing gold to a seven-year high and pushing the 10-year Treasury yield to an all-time low of 0.3% early in the morning.
The sale comes as fears mount that the viral epidemic will further disrupt supply chains, travel and production around the world.
Conditions deteriorated considerably after the world’s oil-producing countries failed to reach an agreement at a meeting between cartel members in Vienna last week. The impasse continued this weekend, with Saudi Arabia and Russia planning to accelerate production on their own terms after the expiration of the current agreement at the end of month.
The spat has lowered the price of oil by the largest amount since the Gulf War.
“We have almost lost all of our anchors,” said Mohamed El-Erian, chief economic adviser at Allianz, on Monday morning. “We have lost the economic anchor with the coronavirus. We have lost our political anchor, people losing confidence in the Fed’s ability to turn the tide. And over the weekend, we lost a market anchor with OPEC, ”he told CNBC.
Market chaos means participants are now planning a further rate cut from the Federal Reserve, anticipating that the central bank will cut the current range from 1 to 1.25% this month to zero, a level never seen before since the financial crisis.
The next Fed meeting is scheduled for March 17-18 in Washington, but some market observers say a decision may come sooner. The economic fallout from the virus prompted the Fed to implement an emergency rate cut last week, the first time it has made such a decision since the collapse of Lehman Brothers in 2008, one triggers of the recession.