[New York Close] Collapsed US Government COVID Trust... Falls to 4% Range

Domestic COVID-19 Infections in US Shake Investor Sentiment
Drop Exceeds Black Monday Levels
Market Experts Say "No Trust in Government"

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. New York stock market is collapsing helplessly due to fears of the novel coronavirus infection (COVID-19). Concerns are spreading that the U.S. is not a safe zone, causing the New York stock market to fall weakly.

On the 27th (local time), the Dow Jones Industrial Average fell 1,190.95 points (4.42%) to close at 25,766.64, the S&P 500 index dropped 137.63 points (4.42%) to 2,978.76, and the Nasdaq index declined 414.29 points (4.61%) to 8,566.48.

The three major indices showed a typical bearish market pattern, weakening as the closing time approached. Some evaluations say the market has entered a correction phase after falling 10% from last week's peak.

Although the Dow's decline on this day was far below the previous largest drop in terms of percentage, it was the largest ever in terms of points. Previously, the Dow fell 1,175 points on February 5, 2018, and 1,033 points three days later on the 8th.

During Black Monday in 1987, the Dow fell 25% (508 points). Compared to then, the index has risen significantly, so the point drop is relatively larger.

Conversely, the VIX, known as the "fear index," surged about 40%, reflecting market anxiety.

The market decline on this day is understood to be due to the spread of fear that the confirmed case, reported the previous day, with a high possibility of local transmission in the U.S., could lead to a global pandemic.

U.S. President Donald Trump assured at a press conference the previous day that the U.S. is very well prepared for COVID-19 and that the risk to Americans remains low, but the market remains skeptical.

California Governor Gavin Newsom's briefing that at least 8,400 people are being monitored for COVID-19 risk also raised concerns.

James Bianco, Chief Investment Officer of investment advisory firm Bianco Research, evaluated, "The way COVID-19 has unfolded so far is shaking trust in the government."

Amid a preference for safe assets, the 10-year U.S. Treasury yield briefly fell below 1.25% during the session, continuing an ultra-strong trend in the bond market.

With market interest rates falling, expectations for a Federal Reserve (Fed) rate cut have increased. The Chicago Mercantile Exchange's FedWatch tool shows that the probability of at least one rate cut by April is approaching 90%.

Charles Evans, President of the Federal Reserve Bank of Chicago, also stated that he is monitoring the COVID-19 situation and argued that policy adjustments should be considered if necessary.

International oil prices also failed to avoid weakness. On the New York Mercantile Exchange (NYMEX), April delivery West Texas Intermediate (WTI) crude oil closed at $47.09 per barrel, down 3.4% ($1.64) from the previous day.

Gold prices remained slightly down. On the same day, April delivery gold on the New York Commodity Exchange closed at $1,642.50 per ounce, down 0.04% ($0.60) from the previous day.