(CBS News) — U.S. stocks plunged so quickly Monday that trading was halted as frightened investors fled the markets amid growing economic uncertainty over the spreading coronavirus. Oil markets also collapsed after Saudi Arabia said it plans to slash prices, escalating a battle with Russia just as the coronavirus’s impact is reducing demand for oil.
The Dow tumbled 1,838 points, or 7.1%, to 24,026, only minutes after trading opened on Monday. The S&P 500-stock index and tech-heavy Nasdaq composite also declined by almost 7%. Trading was halted for 15 minutes because of the steep declines.
Monday’s sharp decline marks the third week of turmoil for U.S. investors, who are weighing the impact of the growing coronavirus outbreak. The new COVID-19 disease was blamed for at least 24 deaths in the U.S. as of Monday, with the number of coronavirus disease cases in the United States topping 500 on Sunday.
Businesses such as Twitter are asking employees to work at home, while universities including Stanford and Columbia are suspending in-person classes. Economists say the risk of recession is increasing due to business disruptions.
“If you ever wondered what would happen if someone lobbed a hand grenade into a bloodbath, now you know,” Tom Holland of investor advisory firm Gavekal, said in a report. “It’s not pretty. Investors logging onto their screens on Monday have been greeted by a sea of red, the like of which has not been seen for 10 years.”
He added, “One of the few things investors can conclude with any confidence is that market conditions are now likely to get a good deal worse before they get better.”
Stocks have passed the threshold for a correction, when the market declines 10% from its most recent high, and are approaching bear territory, or when stocks lose more than 20% of their value. The stock market hasn’t seen a bear market since the financial crisis, when the S&P 500 shed about 56% of its value over a 17-month period.
Oil prices plunged to their lowest since the 1990s Gulf War as Saudi Arabia slashed prices and boosted output. The benchmark U.S. crude price fell as much as 30%, deepening a rout that began when Saudi Arabia, Russia and other major producers.
While investors typically welcome lower energy costs for businesses and consumers, the abrupt plunge rattled markets already on edge about over the coronavirus. The decline in oil prices could also hurt U.S. shale producers, adding to economic anxieties, Gavekal’s Holland noted.
At the same time, global oil demand will decline due to the coronavirus this year, according to the International Energy Agency.
“While the situation remains fluid, we expect global oil demand to fall in 2020 – the first full-year decline in more than a decade – because of the deep contraction in China, which accounted for more than 80% of global oil demand growth in 2019, and major disruptions to travel and trade,” it said in its March report.
It added, “The immediate outlook for the oil market will ultimately depend on how quickly governments move to contain the coronavirus outbreak, how successful their efforts are, and what lingering impact the global health crisis has on economic activity.”