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Dow Average Sinks Into Bear Market on Virus Fears: Markets Wrap

Jeremy Herron and Vildana Hajric
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U.S. Futures Drop, Yen Gains With Stimulus Pending: Markets Wrap

(Bloomberg) -- Stocks plunged around the world, oil tumbled and the stress in U.S. credit markets deepened after the World Health Organization called the virus spread a pandemic and the Trump administration remained unable to detail any stimulus measures to combat the economic fallout.

The latest bout of virus-fomented turmoil tipped Dow Jones Industrial Average into a bear market, ending the longest bull run in the history of American equities. The blue-chip slumped 5.9% Wednesday and ended 20% below its February closing record. The S&P 500 dipped into bear territory before closing 19% below its high.

The WHO declaration rattled already on edge that the spreading virus will upend global growth. President Donald Trump didn’t keep his promise to detail stimulus plans, and late Wednesday said he the U.S. may not need to take those measures “if we get rid of the problem very quickly.” He plans to make a statement at 8 p.m. in Washington. European officials signaled a growing willingness to move soon to combat the virus’s effects on the region’s economy.

Signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety. The New York Stock Exchange said it will restrict access to its trading floor, the Wall Street Journal reported.

“We have no idea when the coronavirus, the spread, is going to subside. That uncertainty is going to continue to create a lot of volatility,” said David Spika, the president of GuideStone Capital Management. “We have no idea how to model it, we have no idea what to expect from it.”

Here are the main moves in global markets:

Private equity titan Blackstone Group Inc. asked companies it controls to draw down their bank credit lines to help prevent any liquidity shortfalls.All but 10 stocks in the S&P 500 retreated Wednesday, with every industry down at least 3.9%.Boeing plunged 18% after it said it plans to draw down all of a $13.8 billion loan. Hilton Worldwide lost 9% when it said it would draw some of its credit line.An index of consumer services providers that includes hotels, cruise operators, Starbucks and Chipotle plunged 8.3%.European equities wiped out a 2.3% advance sparked by an emergency rate cut in the U.K.Municipal bonds tumbled, sending rates on 10-year benchmark state and local government debt higher by 22 basis points, the most since records began in 2011.The yen surged 1%, while the euro advanced with the pound.Crude sank 4.2% to sink below $33 a barrel.Asian equities lost 1.7%.

U.S. stocks extended their three-week slide as investors grappled with the potential economic hit from the virus that is upending daily routines around the world. Policy makers are seeking to assure traders they’re on alert, with the ECB indicating it may move as soon as this week, the Bank of England cutting rates and German Chancellor Angela Merkel pledging to do “whatever is necessary” to bolster the economy.

In the U.S., the Trump administration continues to promise “major” stimulus, but details remain uncertain. Democrats plan to urge the president to declare a national state of emergency. Markets are now growing worried that whatever does come will not have the ability to stave off a major blow to the world’s largest economy.

“Every day we get whipsawed back and forth, and what we’re seeing today is general disappointment that fiscal policy is not at all clear in how it’s going to stimulate the economy,” said Michael Reynolds, an investment strategy officer at Glenmede Trust Co.

Meanwhile, Joe Biden cemented his position as front-runner for the U.S. Democratic presidential nomination with primary victories Tuesday, further easing concerns among those opposing Bernie Sanders’s progressive platform.

(S&P 500 sits 19% below its record as sell-off extends)

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka

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