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Stocks drift, still headed to worst quarter since 2008

By STAN CHOE AP Business Writer

NEW YORK (AP) — Stocks are drifting in subdued trading Tuesday morning, a rare calm day in what is likely to be Wall Street's worst quarter of performance since the 2008 financial crisis.

The S&P 500 flipped from modest losses to gains during the first hour of trading, trimming its loss for the first three months of the year to 18.6%. Asian markets rose earlier in the day following a stronger-than-expected report on China's economy, where factories are reopening as the spread of the coronavirus slows there. But momentum stalled in Europe, where the number of deaths jumped in Spain.

The surge of coronavirus cases around the world has sent markets to breathtaking drops since mid-February, undercutting what had been a good start to the year. Markets rose early in the quarter with expectations that the economy was accelerating due to a calming trade wars and low interest rates around the world. 

Benchmark U.S. crude oil has dropped by roughly two thirds this quarter and hit its lowest price since 2002, for example, while Germany's DAX has lost a quarter of its value for its worst quarter in nearly 18 years. 

The big question is if markets will get worse. At this point, no one knows.

The reason for the huge declines in stock markets from Japan to Germany to the U.S. is that economies around the world are grinding to near standstills as businesses close their doors and people hunker down at home in hopes of slowing the spread of the virus. A record number of Americans applied for jobless benefits two weeks ago as layoffs sweep the country, and the economy will likely be in dismal shape until the spread of the virus slows. 

The hope is that massive aid coming from the Federal Reserve and Capitol Hill can help prop up the economy in the meantime. Those hopes have led stocks to rally recently, and the S&P 500 has jumped nearly 18% since last Monday. 

Goldman Sachs economists said Tuesday they expect the U.S. economy to shrink 34% in the second quarter, but they expect growth to rebound in the third quarter. 

The S&P 500 was up 0.1%, as of 10:17 a.m. Eastern time. The Dow Jones Industrial Average rose 89 points, or 0.4%, to 22,417, and the Nasdaq was up 0.8%.

The relatively modest moves are a big departure from earlier in the month, when huge swings punished investors. The S&P 500 had its worst day since Black Monday 1987 on March 12 with a 9.5% loss, for example, only to outdo itself with a 12% drop two days later. Sandwiched in between was a 9.3% surge. 

The number of known coronavirus cases keeps rising, and the worldwide tally has topped 780,000, according to Johns Hopkins University. The United States has the highest number in the world, more than 160,000. 

Most people who contract COVID-19 have mild or moderate symptoms, which can include fever and cough. But for others, especially older adults and people with existing health problems, the virus can cause pneumonia and require hospitalization. More than 37,000 have died worldwide due to COVID-19, while more than 160,000 have recovered.

"We're also still not even close to peak coronavirus in the U.S. which has already reported more cases than any other country and will sadly likely see a huge spike in the number of deaths, meaning further lockdown measures will likely follow," said Craig Erlam, senior market analyst at OANDA Europe. "Huge challenges still lie ahead."


AP Business Writer Pan Pylas contributed from London.