The blue-chip Dow Jones Industrial Average (DJIA) fell by over 1,000 points in volatile trading intraday on Wednesday, as an oil price war and fading hopes for a fast coronavirus-related economic stimulus package sapped investor sentiment and continued to rock markets.
In a show of the kind of extreme volatility that has roiled markets in recent weeks, the Dow saw its worst-ever single-day drop of over 2,000 points on Monday, after Saudi Arabia announced oil price cuts and plans to pump more crude oil over the weekend, before soaring on Tuesday to close up by 1,167 points on hopes of an economic stimulus package by the Trump administration to counter COVID-19 economic fallout.
But details remain scant regarding the much-anticipated coronavirus relief funding, aside from broad expectations of a payroll tax cut. President Donald Trump met Republican lawmakers on Tuesday, after which the president announced “tremendous unity in the Republican party” in formulating a response to counter economic fallout from the virus outbreak, but provided few specifics, adding, “You’ll be hearing about it soon.”
Treasury Secretary Steve Mnuchin said Wednesday that a broader stimulus plan would need time to get through Congress and expressed support for a more modest measure in the short-term.
“The president very much wants to consider a stimulus bill, whether it is through a payroll tax or otherwise. We realize that may not get done this week, so we want to get done what we can do this week and we will come back,” Mnuchin said during a House Appropriations subcommittee hearing, reported MarketWatch.
Mnuchin also told lawmakers on Wednesday that the range of steps to offset the economic impact of the fast-spreading coronavirus being considered by the Trump administration could pump hundreds of billions of dollars into the U.S. economy.
He likened the outbreak to a hurricane, adding that the costs needed to be picked up, but emphasized that the situation would not go on “for years.”
Oil producers, meanwhile, have embarked on a global round of price cuts and production boosts as part of a fight for market share, ignited by top exporters Saudi Arabia and Russia, that has wiped more than 40 percent off the international oil market this year.
The developments weighed on markets Wednesday, with the blue-chip Dow tumbling by 1,073 points at 12:02 ET, or 4.29 percent, according to TradingView. Other Wall Street majors, the S&P 500 and Nasdaq, were both down around 3 percent at around the same time.
The Wall Street “fear gauge,” or the VIX volatility index, was up over 10 percent at a level of over 52, far above its red-line threshold of 31, above which markets are seen as gripped by uncertainty and fear.
The number of U.S. coronavirus cases has continued to rise steadily as almost three-quarters of U.S. states reported confirmed cases of COVID-19, the disease the new virus causes. More than 1,025 cases and 28 deaths have been reported, according to a count by Johns Hopkins University.
The rise in the number of coronavirus infections in the United States has concerned health officials and spurred calls for action to expand testing and avert an economic meltdown.
Reuters contributed to this report.