Sell-off sends stocks tumbling
China virus’s effect on economy raises investors’ concern
U.S. stocks fell sharply Monday, sending the Dow Jones Industrial Average down by more than 450 points, as investors grappled with concerns about the spread of a new virus in China.
The sell-off gave the Dow its first five-day losing streak since early August and handed the S&P 500 its worst day since early October. Both indexes gave up a significant portion of their gains from this month.
The Dow fell 453.93 points, or 1.6%, to 28,535.80. The Dow at one point was down nearly 550 points. The
S&P 500 index dropped 51.84 points, or 1.6%, to 3,243.63. The Nasdaq lost 175.60 points, or 1.9%, to 9,139.31. The Russell 2000 index of smaller-company stocks gave up 18.09 points, or 1.1%, to 1,644.14.
Most markets in Asia were closed for the Lunar New Year holiday, but Japan’s Nikkei fell 2.03%, its biggest decline in five months. European markets also slumped. Germany’s DAX and France’s CAC 40 dropped 2.7%.
The latest bout of selling on Wall Street came after China announced a sharp rise in cases of the virus.
Airlines, resorts and other companies that rely on travel and tourism suffered steep losses. Gold prices rose as did bonds, as traders sought refuge in safer holdings. The yield on the 10-year Treasury fell to 1.6%, its lowest level since October.
“Over the weekend you saw more cases,” said Quincy Krosby, chief market strategist at Prudential Financial. “That got investors and traders worried that this may be a longer event. The next question is, ‘What happens to global growth if this does continue and magnify?’”
Chinese health authorities as of Monday had confirmed thousands of cases of the virus along with more than 100 related deaths as authorities extended the weeklong Lunar New Year holiday by an extra three days as a precaution against the virus spreading further. The virus has spread to a dozen countries, including the U.S. Besides the threat to people’s lives and health, investors are worried about how much damage the virus will do to profits for companies around the world.
Even if U.S. companies are thousands of miles away from Wuhan, the interconnected global economy means they have plenty of customers and suppliers in China. It’s the world’s second-largest economy, and it accounts for 6% of all revenue for S&P 500 companies over the past 12 months.
That’s nearly double that of any other country besides the United States, according to FactSet.
“Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy,” said Alec Young, managing director of global markets research at FTSE Russell.
Resort operators were among the biggest losers in the S&P 500. Wynn Resorts experienced an 8.1% tumble, while Las Vegas Sands dropped 6.7%. The companies get most of their revenue from the Chinese gambling haven of Macao. MGM Resorts fell 3.9%.
American Airlines lost 5.5%, and Delta dropped 3.4% as part of a broad slide for airlines because of concerns that international travel will decline because of the virus’s spread.
Booking companies and cruise-line operators also saw their stocks drop. Expedia Group fell 2.7%, and Carnival slid 4.7%.
The technology sector, the biggest in the S&P 500, also saw heavy selling. Apple, which relies on China for supplies and sales, fell 2.9%.
Financial stocks took steep losses. Citigroup dropped 2.2%.
Energy stocks fell broadly as U.S. oil prices dropped 1.9% on worries about reduced demand from China. The oil field-services company Schlumberger skidded 5.1%.
Utilities, real estate stocks and makers of household goods held up better than the rest of the market, though they still finished in the red. The sectors are viewed as less risky and are not as affected by international issues and developments.
A few companies managed to climb against the sliding markets. Clorox, the maker of bleach and cleaning products, rose 1.1%.
Small biotechnology companies and drug developers made some of the biggest gains. Cleveland BioLabs’ shares more than doubled, while NanoViricides and BioCryst also climbed sharply.
“If you look at this right now, investors and traders are looking at pockets of opportunity,” Krosby said. “It’s not a question of if, but when they start buying.”
Investors are also dealing with a heavy week of corporate earnings. Apple will report financial results today. Pharmaceutical giant Pfizer and coffee chain Starbucks will also report.
Boeing, McDonald’s, Coca-Cola and Amazon are also among the biggest names reporting earnings throughout a week that includes reports from 147 S&P 500 companies.
Benchmark crude oil fell $1.05 to settle at $53.14 a barrel. Brent crude oil, the international standard, dropped $1.37 to close at $59.32 a barrel.
Wholesale gasoline slid 3 cents to $1.48 per gallon. Heating oil declined 5 cents to $1.70 per gallon. Natural gas inched 1 cent higher to $1.90 per 1,000 cubic feet.
Gold rose $5.50 to $1,577.40 per ounce, silver fell 6 cents to $18.06 per ounce, and copper slid 9 cents to $2.60 per pound.