U.S. Stocks Plunge as Coronavirus Crisis Spreads - The New York Times

Stocks tumbled around the world on Monday as expanding outbreaks of the coronavirus in Italy and in South Korea forced investors to reconsider the threat the virus poses to growth in Europe and the United States.

China’s economy has already been hamstrung by fears of the virus, which has infected more than 77,000 people there and triggered quarantines that have closed factories. But rapidly spreading outbreaks elsewhere in Asia as well as Europe and the Middle East have begun to erode confidence that the virus will pass sooner rather than later.

“The coronavirus might be slowing in mainland China, but the huge jump over the weekend to various other countries has many reassessing 2020 growth estimates,” Ryan Detrick, senior market strategist for LPL Financial, a money management firm, wrote in an email. He added: “We could see quickly decreasing earnings and growth outlooks.”

The S&P 500 was down 3 percent at midday in New York, the biggest daily decline since December 2018. European markets recorded their worst day since 2016, and major benchmarks in Asia also closed sharply lower.

Investors have been jumpy since the start of the crisis in January, because of the role that China’s factories play in global business and because the country is a huge consumer market itself. But while analysts have incorporated the virus into their growth forecasts for the United States in recent weeks, they have only whittled around the edges of expectations.

The Coronavirus Outbreak

• What do you need to know? Start here.

  Updated Feb. 10, 2020

  • What is a Coronavirus?
    It is a novel virus named for the crown-like spikes that protrude from its surface. The coronavirus can infect both animals and people, and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
  • How contagious is the virus?
    According to preliminary research, it seems moderately infectious, similar to SARS, and is possibly transmitted through the air. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
  • Where has the virus spread?
    The virus originated in Wuhan, China, and has sickened tens of thousands of people in China and at least two dozen other countries.
  • How worried should I be?
    While the virus is a serious public health concern, the risk to most people outside China remains very low, and seasonal flu is a more immediate threat.
  • Who is working to contain the virus?
    World Health Organization officials have praised China’s aggressive response to the virus by closing transportation, schools and markets. This week, a team of experts from the W.H.O. arrived in Beijing to offer assistance.
  • What if I’m traveling?
    The United States and Australia are temporarily denying entry to noncitizens who recently traveled to China and several airlines have canceled flights.
  • How do I keep myself and others safe?
    Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.

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The consensus estimate for first quarter growth in the United States has slipped from 1.7 percent at the end of 2019, to 1.5 percent on Monday, according to data from FactSet. Economists at Goldman Sachs, who were expecting first-quarter domestic growth of 2 percent as recently as late January, have been steadily lowering their estimate, which fell to 1.2 percent on Monday.

“The risks are clearly skewed to the downside until the outbreak is contained,” they wrote.

Monday’s drop across markets for stocks, bonds and commodities suggests that investors don’t believe those somewhat muted forecasts are pessimistic enough.

In bond markets, yields tumbled, reflecting a sharp — if perhaps temporary — downgrade of expectations for economic growth and inflation.

The yield on the 10-year Treasury note fell to 1.37 percent in early trading, near the record low closing of 1.36, a level touched back in July 2016. The yield on the 30-year bond is already in record-low territory at 1.82 percent.

Crude oil prices dropped, with a barrel of West Texas Intermediate crude slipping more than 4 percent to roughly $51. It was the sharpest drop for oil since early January. The lower prices will add to pressure on OPEC and Russia to take measures to reduce oil supplies at their next meeting, which is scheduled for early March in Vienna.

And gold — viewed as a safe place to invest during market tumult — rose to a seven-year high.

Airline and technology stocks were particularly hard hit. Delta Air Lines and American Airlines were each more than 7 percent lower, while shares of Apple — which said last week that the outbreak in China was hurting both its supply of iPhones and demand for the devices — fell more than 5 percent in early trading. The tech-heavy Nasdaq composite index dropped more than 3 percent.

In Europe, major benchmarks were down 3 percent or more. The South Korean market ended 3.9 percent lower, after a surge in virus cases prompted President Moon Jae-in on Sunday to put the country on its highest level of alert. Other Asian markets slid, but not by as much.

Uncertainty about the potential impact of the virus remains the baseline setting for many investors, traders and analysts. In a note published on Friday, economists at JPMorgan Chase wrote that they expected global growth to slow to 1 percent in the first quarter, amid a sharp contraction of manufacturing activity.

“While this would mark the weakest quarter of the expansion, these are still optimistic estimates with significant downside risk,” they wrote.

Keith Bradsher contributed reporting.

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https://www.nytimes.com/2020/02/24/business/stock-market-coronavirus.html

2020-02-24 14:32:00Z
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