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Wall Street plunges on fears of coronavirus pandemic

The benchmark S&P 500 lost $927 billion of its value on Monday alone.

Reuters|
Last Updated: Feb 25, 2020, 08.09 AM IST
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AFP
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The S&P 500 and the Dow Jones Industrial Average on Monday suffered their biggest one-day percentage losses in two years after a surge in coronavirus cases outside China fanned worries about the global economic impact of a potential pandemic.

Investors sold riskier assets and rushed to traditionally safer bets such as gold and US Treasuries after countries including Iran, Italy and South Korea reported a rise in virus cases over the weekend even as China eased curbs with no new cases reported in Beijing and other cities.

The benchmark S&P 500, which represents over 44 per cent of the market capitalization of all global equities, lost $927 billion of its value on Monday alone and $1.33 trillion since its closing high on Wednesday last week, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.

The S&P and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points on the day for only the third time in its history.

The technology-heavy Nasdaq fell 3.71 per cent, the biggest daily percentage drop of the three major averages.

"We're not likely to make any progress higher until we have evidence the spread of the coronavirus is decelerating," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The Dow Jones Industrial Average fell 1,031.61 points, or 3.56 per cent, to 27,960.8, the S&P 500 lost 111.86 points, or 3.35 per cent, to 3,225.89 and the Nasdaq Composite dropped 355.31 points, or 3.71 per cent, to 9,221.28.

All of the 11 major S&P sectors closed in the red, led by the energy sector's 4.7 per cent decline and followed by a 4.2 per cent drop in technology stocks.

Apple Inc slid 4.8 per cent as data showed sales of smartphones in China tumbled by more than a third in January.

China-exposed chipmakers fell, with the Philadelphia SE Semiconductor index dropping 4.8 per cent, while concerns about growing travel curbs dragged the NYSE Arca Airline Index down 6 per cent.

Of the S&P's sectors, the defensive utilities, real estate and consumer staples indexes fell the least on the day.

Treasury yields fell to their lowest levels since 2016 as investors sought safety in government bonds, while the yield curve inversion between the 3-month and 10-year US Treasuries deepened in what is often viewed as a recession predictor.

Adding to worries, Goldman Sachs slashed its US growth forecast on Sunday and predicted a more severe impact from the epidemic.

The CBOE Volatility Index, a gauge of investor anxiety, registered its biggest one-day jump since February 2018 and ended the day at 25.03, its highest closing level since January 2019.

"There was this underlying concern that was out there, and obviously over the weekend, it just escalated," said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management in Philadelphia.

After Monday's nosedive, the S&P closed almost 5 per cent below its record closing high, achieved last week, while the Nasdaq ended 6 per cent off its peak close and the Dow ended the day 5.4 per cent below its record close.

The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched technical indicators.

Health insurers such as UnitedHealth Group Inc and Cigna Corp dropped almost 8 per cent after Senator Bernie Sanders, who backs the elimination of private health insurance, strengthened his position for the Democratic presidential nomination with a victory in the Nevada caucuses.

Janney Montgomery Scott's Luschini said that while the coronavirus was "by far and away the primary influence" for the market's decline on Monday, investors, he said, were "also beginning to handicap the odds of Sanders being the Democratic nominee."

In a rare bright spot, Gilead Sciences Inc, whose antiviral remdesivir has shown promise in monkeys infected by a related coronavirus, rose 4.6 per cent.

Declining issues outnumbered advancing ones on the NYSE by a 6.74-to-1 ratio; on Nasdaq, a 6.02-to-1 ratio favored decliners.

The S&P 500 posted seven new 52-week highs and 23 new lows; the Nasdaq Composite recorded 21 new highs and 154 new lows.

On US exchanges, 10.59 billion shares changed hands, compared with the 7.79 billion average for the last 20 sessions.

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