STOCKS AGAIN TANK OVER VIRUS
Dow drops another 879 points as retreat from record high continues
Stocks fell sharply again on Wall Street Tuesday, piling on losses a day after the market’s biggest drop in two years as fears spread that the growing virus outbreak will put the brakes on the global economy.
Nervous investors snapped up low-risk U.S. government bonds, sending the yield on the 10-year Treasury note to a record low.
The S&P 500 has lost 7.6% in the last four days since hitting a record high last Wednesday. The Dow Jones Industrial Average dropped 879 points, for a two-day loss of 1,911 points. Travel-related stocks took another drubbing, bringing the two-day loss for American Airlines to 16.9%. The large publicly traded cruise operators have also suffered double-digit losses.
The Dow Jones industrial average sank 879 points Tuesday as investors absorbed increasingly worrisome forecasts about the coronavirus, which is spreading faster and more broadly than thought and is renewing recession anxiety. Tuesday brought the Dow’s two-day swoon to more than 1,900 points — the worst twoday percentage loss in two years.
The blue chip index went into full retreat after health officials warned it was only a matter of time before the deadly virus becomes a public health threat in the United States. In separate briefings, officials from the Centers for Disease Control and Prevention, the National Institutes of Health and other agencies adopted a markedly different tone about the outbreak, emphasizing they no longer viewed its domestic spread in terms of “if” but rather “when.”
“We are finally starting to see the markets react to the coronavirus,” said Nicole Tanenbaum, chief investment strategist at Chequers Financial Management. “There has been a lot of complacency in the market and a sentiment-driven rally that hasn’t taken into account that this virus may not be as contained as we hoped it would be.”
Tuesday’s slide extended Monday’s dismal finish, which saw the Dow Jones industrial average shed more than 1,000 points in one of the steepest point losses in history. At the market close on Tuesday, the Dow stood at 27,081 after having flirted with 30,000 earlier this month. It has fallen 6.59% this week. The broad S&P closed at 3,128, down 3.03% on the day and down 6.28% over the last two days. The Nasdaq Composite finished the day down 2.77% at 8,965.
“Stocks are due for a bumpy ride as the market assesses the growing likelihood of a broad economic downturn,” said Ball State University economist Michael Hicks. “The economic fundamentals of recession in China and the increasing risk of Covid-19 clearly point to more losses. This is not just a few spooked investors.”
Global markets also have trembled as the outbreak intensifies outside of China. Japan’s Nikkei index sank more than 3%. The Shanghai Composite Index was down roughly 0.6%, and Hong Kong’s Hang Seng was essentially flat. In Europe, Britain’s FTSE 100 fell 1.94% and Germany’s DAX closed the day 1.88%.
The price of oil was hit hard, with U.S. benchmark West Texas Intermediate dipping below $50.
“This is the make-or-break point trying to make a profit in the shale oil patch,” said John Kilduff of Again Capital.
Kilduff said the cratering of demand from China and South Korea “is a onetwo punch to demand. You now have two out of three Asian economies throttling down the manufacturing and oil demand. It’s a major hit.”
Shares of Moderna, the Massachusetts-based drugmaker, surged 25% Tuesday on reports that it had shipped the first batch of a coronavirus vaccine to U.S. government researchers.
According to the Wall Street Journal, Moderna had sent in vials to the National Institute of Allergy and Infectious Diseases in Bethesda, Md. The Institute told the Journal that it expects to start a clinical trial of 20 to 25 healthy volunteers by the end of April.
Much is still unknown about the novel coronavirus virus, prompting a rush to produce a vaccine and test its safety and efficacy. That push isn’t only coming from private biotech firms. Late Monday, the White House asked Congress for $1.8 billion in emergency spending to boost its coronavirus response.