Wall Street pummeled by crude crash, virus spread

NEW YORK (Reuters) - Wall Street tumbled on Monday and recession fears loomed large as plummeting oil prices and ongoing coronavirus worries sparked a panic-driven sell-off, sending investors fleeing risk for safety on the anniversary of the U.S. stock market’s longest-ever bull run.

Wall Street pummeled by crude crash, virus spread

All three major U.S. stock averages opened sharply lower in a plunge so steep it triggered a trading halt due to safeguards put in place to avoid a repeat of 1987’s “Black Monday” crash. The Dow dropped a record 2,000 out of the starting gate.

S&P 500 was on track for its largest one-day percentage drop since December 2008, the height of the financial crisis.

The index is now about 18% below its all-time high set on Feb. 19. A bear market is confirmed when stocks reach 20% below record peak.

“It’s a perfect storm,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. “You’ve got a lot of uncertainty in terms of how far the virus will spread in the U.S. You layer onto this the oil price cut.”

“Today is all about oil being the straw that broke the camel’s back,” Zaccarelli added.

Peter Cardillo, chief market economist at Spartan Capital Securities in New York agreed.

“There’s a lot of fear in the market and if the price of oil continues to move lower it’s an indication that a global recession is not far away,” Cardillo said.

The CBOE Volatility index , a gauge of investor anxiety, touched its highest level since December 2008.

Benchmark 10-year U.S. Treasury yields briefly sank to 0.318%, a record low.

The rout began over the weekend when the oil supply pact between Saudi Arabia and Russia collapsed and both countries vowed to hike production amid weakening global demand due to the coronavirus and signs of an economic slowdown.

Oil prices crashed to their lowest since the 1991 Gulf war, with Brent crude futures LCOc1 last down 22.05% and front-month WTI falling 22.3%, sending the S&P Energy index .SPNY down 19.3%, which would be its largest one-day decline since October 2008.

Global markets were already on edge as worldwide confirmed cases of COVID-19 surged past 110,000, causing widespread supply disruption and large scale quarantine measures as governments scramble to contain the outbreak.

The Dow Jones Industrial Average .DJI fell 2,017.64 points, or 7.8%, to 23,847.14, the S&P 500 .SPX lost 221.98 points, or 7.47%, to 2,750.39 and the Nasdaq Composite .IXIC dropped 578.54 points, or 6.75%, to 7,997.08.