[New York Close] 4% Plunge in 2Q First Trade... Fear Market Resurfaces

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] When U.S. President Donald Trump warned that the COVID-19 crisis would worsen significantly over the next two weeks, the New York stock market experienced a sharp decline of over 4% in its first trading day of April.

On the 1st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 973.65 points (4.44%) to close at 20,943.51, the S&P 500 dropped 114.09 points (4.41%) to 2,470.50, and the Nasdaq also declined 339.52 points (4.41%) to finish at 7,360.58.

With the first day of trading starting weak, the stock market is likely to continue its rollercoaster-like volatility into the second quarter.

The market focused on President Trump's announcement at a press conference the previous day, where he introduced a 30-day social distancing guideline and expressed concern, saying, "We are facing a very tough two weeks in the fight against COVID-19. It will be a very, very painful two weeks," which worsened investor sentiment.

Although the New York stock market showed a rebound last week despite the rapid increase in COVID-19 cases in the U.S., it could not sustain momentum in the face of President Trump's negative outlook.

According to Johns Hopkins University, the number of confirmed COVID-19 cases in the U.S. surpassed 200,000 on this day. Confirmed cases in New York State exceeded 80,000, and deaths approached 2,000. Globally, confirmed COVID-19 cases also surpassed 900,000.

Economic indicators released on this day also pressured investor sentiment. The final March Manufacturing Purchasing Managers' Index (PMI) for the Eurozone (19 countries using the euro), released by IHS Markit, was 44.5, the lowest in 92 months. The U.S. Manufacturing PMI for March, released by the Institute for Supply Management (ISM), recorded 49.1, down from 50.1 the previous month, indicating that the manufacturing sector shifted from expansion to contraction. U.S. automobile sales in March also dropped significantly, with major manufacturers experiencing sales declines in the double digits.

As fear spread, the preference for safe-haven assets resumed. The 10-year U.S. Treasury yield fell intraday to 0.57%. A decline in bond yields means bond prices rose. The dollar index, which shows the value of the dollar against major currencies, also rose 0.47%. However, international gold prices fell for the fourth consecutive trading day, dropping 0.3% ($5.20) from the previous day to $1,591.40 per ounce.

At the New York Mercantile Exchange (NYMEX), May delivery West Texas Intermediate (WTI) crude oil prices fell into the $19 range intraday but closed at $20.31 per barrel, down 0.8% ($0.17) from the previous day. June Brent crude futures on the London ICE Futures Exchange also plunged about 5%, trading in the $24 range. News of an increase in U.S. crude oil inventories contributed to the decline in oil prices.