Stocks

Wall St plunges on fears of coronavirus pandemic

Reuters New York | Updated on February 25, 2020 Published on February 25, 2020

All of the 11 major S&P sectors closed in the red. File Photo   -  Reuters

Energy, technology stocks lead the slide

Wall Street's three major averages plunged on Monday as investors ran for safety 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 weekendeven as China eased curbs with no new cases reported in Beijing and other cities.

The benchmark S&P 500 index and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points, only the third time in its history for such a large decline in one day. Both the Dow and the S&P clocked their biggest one-day percentage declines since February 2018. The technology heavy Nasdaq had the biggest percentage drop, down 3.71 per cent.

“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.

Wall Street's three main indexes had notched record highs last week, partly on optimism that the global economy, supported by central banks, would be able to snap back after short-term weakness related to the virus. 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, 10.51 billion shares changed hands, compared with the 7.79 billion average for the last 20 sessions.

Published on February 25, 2020
This article is closed for comments.
Please Email the Editor