Stock Market Chaos and Amidst Fears of COVID-19

The Dow Jones Industrial Average opened at about 1,200 points lower on Thursday, February 27th. This drop was the biggest one-day point drop in the DJIA’s history. This market fall translated to about a 4% drop in the Dow’s stock values, making the DJIA close to $25,766 a share. This was just three days after the record-breaking 1,031-point drop on the 24th.


The DJIA’s drop on February 24th, which was one of the largest point drops ever. Credit: Barron’s.

The Dow Jones Industrial Average consists of the top 30 US stocks and measures the index of all of them combined. The DJIA generally serves as a measure of the current status of the entire stock market as it tracks this index. In context, the Dow’s 1987 crash created a 508-point drop that represented a 23% plunge. In comparison, this week’s drop is less significant, but still very meaningful.

The Dow’s fall during the 1987 crash. Credit: Shares Explained.

While the percentage drop in stock prices may not have been as severe as previous crises, the source of the current market declines is new. This drop is most associated with the panic that has arisen with the spread of COVID-19, as Thursday’s drop erased most of the Dow’s gains for the year. Generally known as the Coronavirus, the outbreak of this infectious disease originated in the city of Wuhan, China. Over 100,000 people have been diagnosed with the disease globally, and at least 3,200 people have died, most of whom were in China.


The record-breaking point drop came after news of broke of COVID -19 spreading to nations other than China, like Italy and Iran. Fears that global supply chains and economies were threatened as a result of quarantine procedures, as in the case of numerous Chinese cities. It appears that even if the disease does not reach the entire globe, the economic ramifications of such a panic have already made massive impacts on people worldwide.


However, during past epidemics like this, the market usually rebounds, which it did, for a short while. On Monday, March 2nd, the Dow snapped out of its decline that had gone on for over a week. The index surged 1,294 points, making it the index’s largest one-day point gain in its history.

The DJIA’s point changes during the hectic economic week of Coronavirus news, highlighting the subsequent point gain on Monday. Credit: CNBC.

However, just the next day, the stocks fell sharply once again as the Federal Reserve made the decision to slash interest rates by half a percentage point. This was an emergency effort to stem slower economic growth from the coronavirus outbreak. Inadvertently, the Federal Reserve’s actions may have sparked even more fear for Americans.


“It’s great that the Federal Reserve recognizes that there’s going to be weakness, but it makes me feel, wow, the weakness must be much more than I thought,” CNBC’s Jim Cramer. “I’m now nervous. I’m more nervous than I was before.”