Wall Street has dipped as the novel coronavirus abruptly ended the longest spell of US employment growth on record, but declines were limited by a surprise expansion in the US services sector.
The Labor Department’s report said a recession was under way as business activities have come to a standstill, but investors feared it did not reflect the full extent of the economic damage as the survey only considered data until mid-March.
With the S&P 500 already down about 25 per cent from its mid-February record highs, or nearly $US7 trillion in market value, analysts said the magnitude of the decline in payrolls had been priced in to a large degree.
Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan, said the market already knew that recent job losses had been historic and tremendous.
“We are coming to terms with just how significant this is going to be. The data will be very bad before it gets much worse in April and May, before we start seeing improvements,” he said.
The worldwide spread of the virus has forced billions of people to stay indoors and pushed entire sectors to the brink of collapse, leading to mass lay-offs and dramatic steps by companies to raise cash.
Walt Disney said on Thursday it would furlough some US employees this month, while sources said luxury retailer Neiman Marcus was stepping up preparations to seek bankruptcy protection.
Disney’s shares fell 1.6 per cent and were the biggest drag in the communication services index, while Under Armour shed 4.5 per cent after saying it would temporarily lay off employees at its US stores.
Economists have slashed their forecasts for US GDP, with Morgan Stanley now expecting a 38 per cent contraction in the second quarter. Analysts also foresee an earnings recession for Corporate America.
Data showed a reading of ISM’s services activity index fell to 52.5 in March from 57.3 in February, but was better than the 44.0 economists had feared, which would have indicated an outright contraction.
At 10.43am local time on Friday the Dow Jones Industrial Average was down 318.23 points, or 1.49 per cent, at 21,095.21, the S&P 500 was down 31.04 points, or 1.23 per cent, at 2495.86 and the Nasdaq Composite was down 86.76 points, or 1.16 per cent, at 7400.55.
Engine maker Cummins fell 1.6 per cent after saying it would cut salaries of all US employees to reduce costs, while Ford dropped 2.9 per cent after extending a temporary suspension at most of its European manufacturing sites until May 4.
Raytheon Technologies shed four per cent as it pulled 2020 outlook for its aerospace units.
Tesla jumped eight per cent after the electric-car maker said production and deliveries of its Model Y sport utility vehicle were ahead of schedule, as it delivered the highest number of vehicles in any first quarter to date.