(Bloomberg) -- Financial markets spasmed, sending U.S. stocks down more than 5% and Bloomberg’s dollar index up to a record, as the economic fallout from the pandemic outpaced the massive response from governments and central banks.
The S&P 500 fell as much as 9.8%, before a late-session bounce trimmed the decline. The Dow Jones Industrial Average briefly wiped out all the gains logged since Donald Trump took office, with investors craving more government spending to offset the impact from the virus.
Bonds tumbled around the world a day after Treasuries notched biggest yield jump since 1982, and municipal bonds extended the deepest rout since 1987 as markets braced for the potential flood of spending. Oil sank 24% to an 18-year low. The dollar strengthened a seventh straight day. The pound hit its lowest level against the greenback since 1985. Dollar-funding markets remained strained, although improved from extreme levels in recent days.
Trump offered few details at a press briefing on the specifics his Treasury secretary is discussing with Congress. The Federal Reserve dusted off crisis-era programs to stabilize financial markets.
Governments have pledged or are considering massive fiscal support to offset the economic shock from the pandemic, with the Trump administration moving toward a big package, but the virus continues to spread at a pace that is forcing massive shutdowns across the globe.
“The missing fundamental ingredient for a sustainable recovery in risk appetite is some evidence that the growth of global Covid-19 infection rates is peaking,” said Paul O’Connor, head of multi-asset at Janus Henderson Investors. “Clearly, we are not there yet.”
The planned U.S. stimulus could amount to $1.2 trillion, aiming to stave off the worst impact of a crisis that already looks set to plunge many of the world’s economies into recession. Meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. Those responses came after stresses appeared in the short-term funding markets.
“I don’t think we’re out of the woods yet in terms of liquidity,” Mark Konyn, chief investment officer at AIA Group in Hong Kong, told Bloomberg TV. “It’s a question of when the fiscal measures will have the most efficacy.”
These are the main moves in markets:
©2020 Bloomberg L.P.