Dow drops 1,000 points as pandemic fears heighten

The three main indexes were on track for their worst week since the 2008 global financial crisis. (AFP)
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Updated 29 February 2020

Dow drops 1,000 points as pandemic fears heighten

  • The benchmark S&P 500 fell about 12 percent

BENGALURU: The Dow Jones Industrials slumped more than 1,000 points in intraday trading for the third time this week on Friday, as the rapidly spreading coronavirus outbreak raised fears of global recession.

Over the week, virus fears have wiped nearly $3 trillion off the combined market value of S&P 500 companies, putting the three main indexes on track for their worst week since the 2008 global financial crisis.

As the world prepares for a potential pandemic, investors rushed to safe assets, deepening an inversion of the US Treasury yield curve, a classic recession signal.

The benchmark S&P 500 fell about 12 percent from its record closing high hit last week, confirming its fastest correction in history on Thursday.

In morning trade, the Dow Jones Industrial Average was down 1,058.08 points, or 4.11 percent, while the S&P 500 was down 118.91 points, or 3.99 percent.

All the 11 S&P sectors shed at least 2 percent and the defensive utilities, consumer staples and real estate sectors dropped more than 3 percent. The three sectors have outperformed the benchmark index this month.

“This selling is a bit extreme for something that we don’t know enough about,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

“What I do know is that the coronavirus is not going to lead us into a financial crisis that is long lasting. It could put us in a technical recession, but the real concern is does that recession cause the US consumer to pare back on spending?“

While the magnitude of the economic damage from the containment measures, which have crippled supply chains and hit business investment, remained unclear, analysts have sharply downgraded their outlook for growth and corporate earnings.

Adding to worries, the Commerce Department’s data on Friday showed US consumer spending rose less than expected in January, a loss of momentum that could be exacerbated by the virus outbreak.

Traders are now pricing in an interest rate cut by the Federal Reserve as soon as next month, but many have expressed doubts about how this would mitigate the impact of the outbreak.

Among individual stocks, Mylan NV dropped 6 percent after the drugmaker cautioned a financial hit from the coronavirus outbreak and warned of drug shortages in case of continued spread of the virus.

Declining issues outnumbered advancers for a 9.24-to-1 ratio on the NYSE and a 4.63-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week highs and 108 new lows, while the Nasdaq recorded 11 new highs and 386 new lows. 


UK retailer Debenhams goes into the red again

Updated 10 April 2020

UK retailer Debenhams goes into the red again

  • Debenhams’ 142 UK stores are closed with Britain in coronavirus lockdown

LONDON: British department store group Debenhams went into administration for the second time in 12 months on Thursday, seeking to protect itself from legal action by creditors during the coronavirus crisis that could have pushed it into liquidation.

With Britain in lockdown during the pandemic, Debenhams’ 142 UK stores are closed, while the majority of its 22,000 workers are being paid under the government’s furlough scheme. It continues to trade online.

The retailer went into administration for a first time in April last year, wiping out equity investors including Mike Ashley’s Sports Direct, and is now owned by a lenders consortium called Celine UK NewCo. 

Debenhams said administrators from FRP Advisory would work with the existing management team to get the UK business into a position to re-open and trade from as many stores as possible when restrictions are lifted by the government.

Chief Executive Stefaan Vansteenkiste said that he anticipated the firm’s owners and lenders would make additional funding available to fund the administration period.

However, the group’s business in Ireland looks doomed.

Debenhams said that it expected administrators to appoint a liquidator to the 11-store Irish operation, which employs 2,000.

The moves makes Debenhams the first major retail casualty of the health crisis in Ireland, where the government, as in the UK, has closed all non-essential shops.

Ireland on Monday reported a trebling of its unemployment rate to 16.5 percent with a further surge expected later in the month.

“We are desperately sorry not to be able to keep the Irish business operating but are faced with no alternative option in the current environment,” said Vansteenkiste.