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U.S. Stocks Plunge as Coronavirus Crisis Spreads U.S. Stocks Plunge as Coronavirus Crisis Spreads
(about 3 hours later)
Stocks on Wall Street plummeted on Monday, following sharp declines in global markets after spreading coronavirus outbreaks in Italy and in South Korea stoked concern among investors about the potential damage they might inflict on the global economy. Stocks tumbled around the world on Monday as expanding outbreaks of the coronavirus in Italy and in South Korea forced investors to reconsider the threat the virus poses to economies in Europe and the United States.
The S&P 500 dropped nearly 3 percent at the start of trading, after European markets recorded their worst day since 2016 and major benchmarks in Asia closed sharply lower. The Dow Jones industrial average fell more than 900 points. China’s economy has already been hamstrung by fears of the virus, which has infected more than 77,000 people there and triggered quarantines that have closed factories. But rapidly spreading outbreaks elsewhere in Asia as well as Europe and the Middle East have begun to erode confidence that the virus will pass sooner rather than later.
The number of people infected with the virus has ballooned to more than 79,000 people in Asia, crippling China’s economy. Rapidly spreading outbreaks have now been reported in Italy, Iran and South Korea. “The coronavirus might be slowing in mainland China, but the huge jump over the weekend to various other countries has many reassessing 2020 growth estimates,” Ryan Detrick, senior market strategist for LPL Financial, a money management firm, wrote in an email. He added: “We could see quickly decreasing earnings and growth outlooks.”
The S&P 500 was down 3 percent at midday in New York, the biggest daily decline since December 2018. European markets recorded their worst day since 2016, and major benchmarks in Asia also closed sharply lower.
Investors have been jumpy since the start of the crisis in January, because of the role that China’s factories play in global business and because the country is a huge consumer market itself. But while analysts have incorporated the virus into their growth forecasts for the United States in recent weeks, they have only whittled around the edges of expectations.
Updated Feb. 10, 2020Updated Feb. 10, 2020
Investors have been on edge since the start of the crisis, because of the role that China’s factories play in global business and because it is a huge consumer market itself. But fresh reports that the virus is not contained are “signaling alarm bells,” a market analyst at Citigroup wrote Monday. The consensus estimate for first quarter growth in the United States has slipped from 1.7 percent at the end of 2019, to 1.5 percent on Monday, according to data from FactSet. Economists at Goldman Sachs, who were expecting first-quarter domestic growth of 2 percent as recently as late January, have been steadily lowering their estimate, which fell to 1.2 percent on Monday.
Airline and technology stocks were particularly hard hit. Delta Air Lines and American Airlines were each more than 4.5 percent lower, while shares of Apple — which said last week that the outbreak in China was hurting both its supply of iPhones and demand for it — fell more than 5 percent in early trading. “The risks are clearly skewed to the downside until the outbreak is contained,” they wrote.
Oil prices slid as demand for crude waned because of concerns about a widening economic slowdown. Brent crude, the international benchmark, fell nearly 4 percent to about $56.40 a barrel on Monday, as did West Texas intermediate, the main U.S. benchmark, which dropped to about $51.50 a barrel. The lower prices will increase pressure on OPEC and Russia to reduce oil supplies at their next meeting, which is scheduled for early March in Vienna.Gold, which is viewed as a safe place to invest during market tumult, rose to a seven-year high. Monday’s drop across markets for stocks, bonds and commodities suggests that investors don’t believe those somewhat muted forecasts are pessimistic enough.
In Europe, major benchmarks were down 3 percent or more. The South Korean market ended 3.9 percent lower, after a surge in coronavirus cases prompted President Moon Jae-in on Sunday to put the country on its highest level of alert. Other Asian markets slid, but not by as much. In bond markets, yields tumbled, reflecting a sharp — if perhaps temporary — downgrade of expectations for economic growth and inflation.
An analyst note from JPMorgan warned “the immediate impact of a large China demand and supply shock will be substantial.” The analysts predicted that global G.D.P. would slow to about 1 percent this quarter, but said they expected a strong recovery midyear. The yield on the 10-year Treasury note fell to 1.37 percent in early trading, near the record low closing of 1.36, a level touched back in July 2016. The yield on the 30-year bond is already in record-low territory at 1.82 percent.
In a commodities report, Citi Research analysts said that the virus’s ripple effect on the global supply chain may be more problematic than expected. Crude oil prices dropped, with a barrel of West Texas Intermediate crude slipping more than 4 percent to roughly $51. It was the sharpest drop for oil since early January. The lower prices will add to pressure on OPEC and Russia to take measures to reduce oil supplies at their next meeting, which is scheduled for early March in Vienna.
And gold — viewed as a safe place to invest during market tumult — rose to a seven-year high.
Airline and technology stocks were particularly hard hit. Delta Air Lines and American Airlines were each more than 7 percent lower, while shares of Apple — which said last week that the outbreak in China was hurting both its supply of iPhones and demand for the devices — fell more than 5 percent in early trading. The tech-heavy Nasdaq composite index dropped more than 3 percent.
In Europe, major benchmarks were down 3 percent or more. The South Korean market ended 3.9 percent lower, after a surge in virus cases prompted President Moon Jae-in on Sunday to put the country on its highest level of alert. Other Asian markets slid, but not by as much.
Uncertainty about the potential impact of the virus remains the baseline setting for many investors, traders and analysts. In a note published on Friday, economists at JPMorgan Chase wrote that they expected global growth to slow to 1 percent in the first quarter, amid a sharp contraction of manufacturing activity.
“While this would mark the weakest quarter of the expansion, these are still optimistic estimates with significant downside risk,” they wrote.
Keith Bradsher contributed reporting.