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Fear of an economic recession brings Wall Street down again

UNITED STATES (OBSERVATORY NEWS) — The New York Stock Exchange fell again in the first exchanges on Friday, the wind of panic caused by the fear of a strong impact of the coronavirus on the world economy still blowing on the financial markets.

The Dow Jones index lost 491.01 points, or 1.91%, to 25,275.63 points.

The Standard & Poor’s 500 fell 1.9% to 2,922.26 points.

The Nasdaq Composite yielded 3.17% to 8,294.64 points at the opening.

The three main stock market indices have been in correction territory since Thursday and are expected to record their largest weekly decline since the 2008 global financial crisis.

Hopes that the effects of the coronavirus on the economy would be limited in time were dashed this week with the acceleration of the spread outside China of the epidemic, which now affects around 40 countries.

As the world fears a possible pandemic, the inversion of the yield curve for US Treasuries has increased, a sign considered to be a precursor to an economic recession.

“What I do know is that coronavirus is not going to drag us into a long-term financial crisis. It could plunge us into a technical recession but the real concern is that this recession is causing the American consumer to cut costs, ”said Robert Pavlik, at SlateStone Wealth LLC.

Market players have sharply lowered their prospects for growth and profits for businesses and are now planning intervention by the Federal Reserve next month. However, some investors question the effectiveness of a rate cut in the face of the unpredictable consequences of the epidemic.

“Lowering interest rates will do almost nothing to ward off a supply shock and even the positive effects on demand are questionable if all economies start to lock in,” said broker analyst Marios Hadjikyriacos online XM.

To make matters worse, the main American statistic of the day showed that consumer spending in the United States had increased less than expected in January, a slowdown which could be amplified by the rapid spread of the coronavirus.

On the stock market, all the S & P-500 indices suffer, starting with the financial sector which lost 2.12%, the fall in bond yields penalizing bank values.

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