Financial crisis looms as US stocks fall into bear territory
Published: Mar 13, 2020 02:19 AM

File Photo: Xinhua

A financial crisis looms as US stocks plunged 20 percent into bear-market territory following the US government's plans to contain the novel coronavirus (COVID-19), which failed to calm investors, an analyst said Thursday.

Thursday morning, the Dow Jones Industrial Average tumbled 8.04 percent, the S&P 500 plunged 6.85 percent, and the Nasdaq Composite dropped 6.21 percent.

For the second time in a week, a circuit breaker was triggered after the S&P 500 hit the 7 percent threshold decline, halting trade during regular market hours for 15 minutes.

US stock slump slashing gains since March 2017 shows that major equities hold a "very dark" outlook on US economic prospects, Dong Shaopeng, a senior research fellow at the Changing Institute for Financial Studies at Renmin University of China, told the Global Times.

Dong predicted US stocks could tumble another 2,000 points, while there are limited measures the White House administration can implement to save the stock market.

The sell-off came as the US government couldn't convince investors of its capabilities in hedging the fallout on the economy due to COVID-19, said Hua Changchun, chief economist at Guotai Junan Securities.

"A 20 percent plunge in the short term will drag down 1.4 percent of US GDP growth and will affect US enterprises and society's confidence, which will lead to greater financial risks," Hua told the Global Times.

Hua said major economies, such as the G20 nations, should implement effective measures to prevent greater risks that are already brewing.