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Coronavirus Drives Stocks Down for 6th Day Coronavirus Drives Stocks Down for 6th Day
(about 1 hour later)
A global stock market meltdown entered its sixth day on Thursday, a decline that has reflected rising fears over the fast spreading coronavirus and pulled major benchmarks to near four-month lows.A global stock market meltdown entered its sixth day on Thursday, a decline that has reflected rising fears over the fast spreading coronavirus and pulled major benchmarks to near four-month lows.
Thursday’s selling came after public health officials in the United States and Germany said new patients in each country had no known connection to others with the illness, a development that could complicate efforts to track the virus. Cases of the virus have appeared in at least 47 countries.Thursday’s selling came after public health officials in the United States and Germany said new patients in each country had no known connection to others with the illness, a development that could complicate efforts to track the virus. Cases of the virus have appeared in at least 47 countries.
The speed of the market turndown — the S&P 500 was at a record just a week ago — has been stunning. Thursday’s trading was volatile, with the S&P 500 falling by as much as 3.5 percent at its lowest point before recovering some ground. The index is close to 10 percent below the high reached on Feb. 19, a drop known as a correction in financial markets.The last time stocks in the United States fell that much was late 2018, when investors worried that the trade war and rising interest rates might tip the U.S. economy into a recession. This recent decline has put the blue-chip benchmark on pace for its worst weekly performance since the 2008 financial crisis. The speed of the market turndown — the S&P 500 was at a record just a week ago — has been stunning. Thursday’s trading was volatile, with the S&P 500 falling by as much as 3.5 percent at its lowest point before recovering some ground. The index is close to 10 percent below the high reached on Feb. 19, a drop known as a correction in financial markets. The last time stocks in the United States fell that much was late 2018, when investors worried that the trade war and rising interest rates might tip the U.S. economy into a recession. This recent decline has put the blue-chip benchmark on pace for its worst weekly performance since the 2008 financial crisis.
Shares in Europe and Asia were similarly hard hit on Thursday, with shares in London falling into a correction. And the collapse in investor confidence spread far beyond stocks. Crude oil fell more than 4 percent, as investors weighed the chance of growing economic paralysis related to travel restrictions, factory shutdowns and other measures to stop the outbreak. On Wednesday night, President Trump directly addressed the outbreak, putting Vice President Mike Pence in charge of the government’s response and saying “we’re very very ready for this.” While Mr. Trump acknowledged the potential economic fallout of the outbreak, he said woes at the aerospace giant Boeing, a strike last year at General Motors and the Federal Reserve’s reluctance to slash interest rates have done more to hurt the economy.
But not long after his news conference, health officials reported that a person in Northern California had become sick despite not being exposed to anyone known to be infected with the coronavirus. Doctors said the patient had to wait days to be tested because of restrictive federal criteria.
Updated Feb. 26, 2020
Officials around the world have struggled to contain the spread of the virus. Prime Minister Shinzo Abe on Thursday asked all of Japan’s schools to close for a month. The country joined China and Mongolia in shuttering schools nationwide over the epidemic.
Health officials in Germany reacted aggressively after a man with no known connection to anyone with the coronavirus tested positive. They closed schools in the community where he lived and reached out to hundreds of people who took part in a carnival celebration over the weekend where the man was also present, urging them to stay home for two weeks.
Even if the United States doesn’t adopt such extreme measures, an outbreak could prompt a serious shift in consumer behavior, hitting the bedrock of the American economy.
“To the degree that consumers change their behavior — so they stop going out to eat, they don’t take the vacation, they cancel the business trip — that consumption, that spending, personal consumption is 68 percent of G.D.P.,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
He added: “That moves it beyond the sphere of ‘people feel bad because their 401(k)s are down’ and into the sphere of economic reality.”
Stocks in Europe and Asia were also hard hit on Thursday, with shares in London falling into a correction. And the collapse in investor confidence spread far beyond stocks. Crude oil fell more than 4 percent, as investors weighed the chance of growing economic paralysis related to travel restrictions, factory shutdowns and other measures to stop the outbreak.
Bond markets broadcast deep pessimism about the economy, as money flooded into Treasury markets, pushing prices sharply higher, and yields — which move in the opposite direction — to once unthinkable depths.Bond markets broadcast deep pessimism about the economy, as money flooded into Treasury markets, pushing prices sharply higher, and yields — which move in the opposite direction — to once unthinkable depths.
The yield on the 10-year Treasury note touched 1.25 percent in morning trading. Prices for junk bonds, and even safer corporate debt, fell.The yield on the 10-year Treasury note touched 1.25 percent in morning trading. Prices for junk bonds, and even safer corporate debt, fell.
“Stocks and bonds say we’re doomed,” wrote Chris Rupkey, chief financial economist at MUFG Union Bank, in a research note on Thursday. “Anyone who has a better idea for what lies ahead please let us know because right now the direction ahead for the economy is straight down.”“Stocks and bonds say we’re doomed,” wrote Chris Rupkey, chief financial economist at MUFG Union Bank, in a research note on Thursday. “Anyone who has a better idea for what lies ahead please let us know because right now the direction ahead for the economy is straight down.”
On Thursday, analysts at Goldman Sachs predicted that companies in the S&P 500 would generate no profit growth as a result of the crisis, because of a “severe decline in Chinese economic activity,” disruption in the supply chain for American companies and a slowdown in the United States economy.On Thursday, analysts at Goldman Sachs predicted that companies in the S&P 500 would generate no profit growth as a result of the crisis, because of a “severe decline in Chinese economic activity,” disruption in the supply chain for American companies and a slowdown in the United States economy.
Microsoft were down nearly 3 percent after the company said on Wednesday that its sales in the current quarter would be lower because of a disruption to its supply chain. Anheuser-Busch InBev on Thursday forecast a steep drop in quarterly profit. Its shares fell 8 percent. Microsoft was down nearly 3 percent after the company said on Wednesday that its sales in the current quarter would be lower because of a disruption to its supply chain. Anheuser-Busch InBev on Thursday forecast a steep drop in quarterly profit. Its shares fell 8 percent.
Companies have also scaled back travel. The French cosmetics giant L’Oreal suspended all business travel for its 80,000 employees until the end of March. Nestlé, the giant Swiss-based food company, said it would suspend all international business trips for its 290,000 workers until mid-March.Companies have also scaled back travel. The French cosmetics giant L’Oreal suspended all business travel for its 80,000 employees until the end of March. Nestlé, the giant Swiss-based food company, said it would suspend all international business trips for its 290,000 workers until mid-March.
In Europe, the FTSE 100 in Britain, the CAC 40 in France and the DAX in Germany were all more than 3 percent lower on Thursday. Asian markets closed the day largely down, though shares in China bucked the general trend, with Shanghai rising 0.1 percent.In Europe, the FTSE 100 in Britain, the CAC 40 in France and the DAX in Germany were all more than 3 percent lower on Thursday. Asian markets closed the day largely down, though shares in China bucked the general trend, with Shanghai rising 0.1 percent.
Kevin Granville and Katie Robertson contributed reporting.Kevin Granville and Katie Robertson contributed reporting.