The Dow Jones Industrial Average slumped more than 1,000 points Monday in the worst day for the stock market in two years as investors worry that the spread of a viral outbreak that began in China will weaken global economic growth.
Traders sought safety in U.S. government bonds, gold and high-dividend stocks like utilities and real estate. The yield on the 10-year Treasury fell to the lowest level in more than three years.
Technology companies, whose supply chains have been disrupted, accounted for much of the broad market slide, which wiped out all of the Dow's and S&P 500's gains for the year.
More than 79,000 people worldwide have been infected by the new coronavirus. China, where the virus originated, still has the majority of cases and deaths. The country's economy has been hardest hit as businesses and factories lie idle and people remain homebound because the government has severely restricted travel and imposed strict quarantine measures to stop the virus from spreading. Economists have cut growth estimates for the Chinese economy.
The ripple effects of the outbreak are being felt all around the world, as China is both a major importer of goods as well as a source of parts through intricate supply chains.
China's government promised tax cuts and other aid Monday to help companies recover despite anti-disease controls that shut down much of the world's second-largest economy last month. Forecasters say it is likely to be at least mid-March before automakers and other companies return to full production.
Still, while concern about the virus has prompted some sporadic selling in the past few weeks, for the most part global markets have traded as if the virus' impact would be limited. Until Monday, the major U.S. stock indexes had all been in the green.
The rapid spread to other countries, however, is raising anxiety about the growing threat the outbreak poses to the global economy.
"Stock markets around the world are beginning to price in what bond markets have been telling us for weeks – that global growth is likely to be impacted in a meaningful way due to fears of the coronavirus," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The Dow, Nasdaq and S&P 500 each fell more than 3% Monday. The yield on the 10-year Treasury note fell sharply to 1.37%. It was at 1.90% at the start of the year. Gold prices jumped 1.7%.
Crude oil prices slid 3.7%. Aside from air travel, the virus poses an economic threat to global shipping.
The slump in U.S. indexes followed a sell-off in markets overseas. South Korea's Kospi fell sharply after the government said the country is now on its highest alert for infectious diseases after cases there spiked. Italy's benchmark tumbled after the number of virus cases there rose dramatically and a dozen towns in the northern part of the country were put under quarantine. There are also more cases of the virus being reported in the Middle East as it spreads to Iran, Iraq, and Kuwait, among others.
The viral outbreak threatens to crimp global economic growth and hurt profits and revenue for a wide range of businesses. Companies from technology giant Apple to athletic gear maker Nike have already warned about a hit to their bottom lines. Airlines and other companies that depend on travelers are facing pain from cancelled plans and shuttered locations.
Technology companies were among the worst hit by Monday's sell-off. Apple, which depends on China for a lot of business, slid 4.8%. Microsoft dropped 4.3%. Banks such as JPMorgan and Bank of America were also big losers.
Cruise lines suffered steep losses, as Carnival, Royal Caribbean Cruises and Norwegian Cruise Line were three of the top four decliners in the S&P 500, each falling around 9%. American Airlines also dropped sharply, and after the market closed, United Airlines withdrew its earnings estimate for 2020 because of uncertainty over how long the virus outbreak will last
Gilead Sciences climbed 4.6% and was among the few bright spots. The biotechnology company is testing a potential drug to treat the new coronavirus. Bleach-maker Clorox was also a standout, rising 1.5%.
Utilities and real estate companies held up better than most sectors. Investors tend to favor those industries, which carry high dividends and hold up relatively well during periods of turmoil, when they're feeling fearful. They're now the best-performing sectors in the S&P 500 for the year, while the tech sector has lost ground.
In the eyes of some analysts, stocks are finally catching up to the bond market, where fear has been dominant for months.
"The yields have been moving lower all year, so that's providing a tail wind for utilities, for real estate," said Willie Delwiche, investment strategist at Baird. "In the face of this heightened uncertainty, especially if it's centered overseas, tech is going to bear some of the brunt of that because it's been so popular, because it's done so well, and because it has so much exposure to Asia."
U.S. government have turned to the safety of bonds throughout 2020, even as stocks overcame stumbles to set more records. The 10-year yield on Monday was near its intraday record low of 1.325% set in July 2016, according to Tradeweb. The 30-year Treasury yield fell further after setting its own record low, down to 1.83% from 1.92% late Friday.
Traders are increasingly certain that the Federal Reserve will cut interest rates at least once in 2020 to help prop up the economy. They're pricing in a nearly 95% probability of a cut this year, according to CME Group. A month ago, they saw only a 68% probability.
Of course, some analysts say stocks have been rising in recent weeks precisely because of the drop in yields. When bonds are paying such meager amounts, many investors say there's little real competition other than stocks for their money.
The view has become so hardened that "There Is No Alternative," or TINA, has become a popular acronym on Wall Street. Even with Monday's sharp drops, the S&P 500 is still within 4.2% of its record set earlier this month.
The Dow lost 1,031.61 points, or 3.6%, to 27,960.80. The S&P 500 index skidded 111.86 points, or 3.4%, to 3,225.89. The Nasdaq dropped 355.31 points, or 3.7%, to 9,221.28 - it's biggest loss since December 2018.
The Russell 2000 index of smaller company stocks gave up 50.50 points, or 3%, to 1,628.10.
Investors looking for safe harbors bid up prices for U.S. government bonds and gold. The yield on the 10-year Treasury note fell sharply, to 1.37% from 1.47% late Friday.
In commodities trading, benchmark crude oil fell $1.95 to settle at $51.43 a barrel. Brent crude oil, the international standard, dropped $2.20 to close at $56.30 a barrel.
Wholesale gasoline fell 4 cents to $1.61 per gallon. Heating oil declined 8 cents to $1.61 per gallon. Natural gas fell 8 cents to $1.83 per 1,000 cubic feet.
Gold rose $27.80 to $1,672.40 per ounce, silver rose 35 cents to $18.87 per ounce and copper fell 3 cents to $2.59 per pound.
The dollar fell to 110.74 Japanese yen from 111.62 yen on Friday. The euro weakened to $1.0842 from $1.0858.
Shares skidded in Asia on Monday after reports of a surge in new virus cases outside China. The decline followed a sell-off Friday on Wall Street.
South Korea's Kospi dropped 3.5% to 2,098.37, while the S&P ASX/200 in Sydnay lost 2.3% to 6,978.30. Hong Kong's Hang Seng dropped 1.5% to 26,890.90 and the Shanghai Composite index lost 0.3% to 3,031.03. Benchmarks in Jakarta, Taiwan and Thailand fell by more than 1% and India's Sensex lost 1% to 40,766.94.
Japan's markets were closed for a holiday.
China's leaders promised more help for companies and the economy, saying they expect their growth targets can still be reached despite the outbreak.
At a news conference Monday, finance and planning officials said they are looking at how to channel aid to businesses after President Xi Jinping publicly promised over the past week to ensure farming and other industries recover quickly.
The government is looking at "targeted tax reduction," interest rate cuts and payments to poor and virus-hit areas, said an assistant finance minister, Ou Wenhan.
"We will do a good job of implementing large-scale interest rate reduction and tax deferral and ensure effective implementation as soon as possible," said Ou.
The viral outbreak that began in China has infected more than 79,000 people globally and killed more than 2,600 people. China has reported 2,592 deaths among 77,150 cases on the mainland.
Another large jump in new cases was reported in South Korea on Monday, a day after the the president called for "unprecedented, powerful" steps to combat the outbreak that is increasingly confounding attempts to stop the spread.
The 161 new cases bring South Korea's total to 763 cases, and two more deaths raise its toll to seven.
Hopes that the outbreak had been contained were premature, Mizuho Bank said in a commentary, "And indeed, fears of secondary infections proliferating outside of China have come home to roost, sending risk assets in a tailspin and a wave of refuge-seeking into safe-haven."
Stocks fell and bond prices jumped Friday on Wall Street amid signs the viral outbreak is weighing on U.S. companies.
The S&P 500 fell 1.1% to 3,337. The Dow Jones Industrial Average fell 0.8% to 28,992. The Russell 2000 index of smaller company stocks gave up 1.1%, while the tech-heavy Nasdaq lost 1.8% to 9,576.
Technology companies, which have much greater exposure to China than other industries, fell the most. Chipmakers, which rely heavily on China for both sales and supply chains, were some of the worst hit. Advanced Micro Devices slid 7%, while Nvidia fell 5.6%.
Data from IHS Markit show U.S. manufacturing and business activity slowed in February from the previous month, coming in below analysts' expectations.
Travel restrictions, business closures and other efforts in China aimed at containing the spread of the virus have begun to disrupt supply chains and sales prospects for Apple and other big companies.
Companies that depend on consumer spending, especially in travel-related industries, also fell broadly. Marriott International shed 2.7% and Carnival fell 1.8%. American Airlines dropped 3.2%. General Motors lost 2.2% and other automakers slipped as the virus hurts auto sales in China
The yield on the 30-year Treasury has dipped to record lows as investors sought the safety of U.S. government bonds. It fell to a record low of 1.886%, according to Tradeweb, from 1.98% late Thursday.
The yield on the more closely followed 10-year Treasury was at 1.47%. That yield, which is a benchmark for mortgages and other kinds of loans, was close to 1.90% at the start of this year.
The price of gold also rose, surging $15.70 to $1,664.50 per ounce.
Expectations have been building among traders that the Federal Reserve will need to cut interest rates this year to help the economy. They're pricing in a 90% probability of at least one cut this year, up from an 85% probability a day ago and a 58% probability a month ago.
Uncertainties are weighing on energy prices as well. Benchmark U.S. crude lost $1.22 to $52.16 per barrel in electronic trading on the New York Mercantile Exchange. It lost 50 cents to $53.38 per barrel on Friday.
Brent crude, the international standard, gave up $1.42 to $56.52 per barrel.
The U.S. dollar rose to 111.59 Japanese yen from 111.57 yen on Friday. The euro weakened to $1.0819 from $1.0847.
After Giorgio Armani's last-minute decision to show his latest collection in an empty theater due to concerns about the new virus, the rest of Milan's runway shows scheduled for Sunday are to go ahead as planned, fashion officials confirmed.
The Italian National Fashion Chamber said in a statement there were no indications from health officials that changes were called for in the face of a new virus that has put dozens of towns in northern Italy on virtual lockdown. It said it was up to individual brands to decide if they would go ahead.
Armani announced overnight that as a precaution, his runway show on Sunday would be conducted in an empty showroom and streamed for the fashion public on the internet. It was the first time the 45-year-old Milan fashion house has taken such a step out of public health concerns.
The fashion chamber said it respected Armani's decision, adding that it had no news of any other fashion houses changing their plans. Dolce&Gabbana, which is not part of the fashion chamber, was scheduled to go on as planned, according to the press office.
Tuscan brand DROMe was preparing models for its morning show, one of eight shows scheduled for Sunday. Creative director Mariana Rosati said she did not believe there was reason to fear, as models sat nearby waiting for hair and make-up.
''I am very sorry what is going on. I know it is not predictable and obviously we need to be careful. But I actually think a lot of panic has been spread for not enough reasons,'' Rosati said. She said she thought fewer people would show up for the morning show, which had been overbooked.
"I hope the people are brave and not just succumbing to panic,'' Rosati said. ''We will try to bring good vibes in this moment." Soon all the seats were filled and the show started with a packed standing room only audience.
Stocks are opening lower again on Wall Street, putting the market on track for a weekly loss after two weeks of gains. Overseas markets were also weaker Friday after a rise in virus cases in South Korea and other countries revived anxiety about the outbreak. Cabot Oil & Gas sank after reporting weak results. The S&P 500 fell 13 points, or 0.4%, to 3,359. The Dow Jones Industrial Average fell 108 points, or 0.4%, to 29,111. The Nasdaq lost 40 points, or 0.4%, to 9,707. Bond prices rose. The yield on the 10-year Treasury note fell to 1.49%.
Global stock markets slipped on Friday after a spike in new virus cases in South Korea and other countries refueled investor anxiety about China's disease outbreak.
Benchmarks in Tokyo, Hong Kong and Sydney closed down and London, Frankfurt and other European indexes were trading lower. Wall Street futures was also expected to dip on the open.
Traders shifted money into bonds and gold, a traditional safe haven.
Bond markets are "sounding a warning on global growth" as virus fears spread to South Korea, Singapore and other economies, DBS analysts said in a report.
Markets had been gaining on hopes the outbreak that began in central China might be under control following government controls that shut down much of the world's second-largest economy. Sentiment was buoyed by stronger-than-expected U.S. economic data and rate cuts by China and other Asian central banks to blunt the economic impact.
But investors were jarred by South Korea's report of 52 new cases of the coronavirus, raising its total to 156, most of them since Wednesday. That renewed concern the infection is spreading in South Korea, Singapore and other Asian economies. New cases were also recorded further afield, from Italy to Iran.
In Europe, the FTSE 100 in London sank 0.2% to 7,422 and Frankfurt's DAX lost 0.1% to 13,656. France's CAC 40 tumbled 0.1% to 6,054.
Losses were trimmed after a survey showed that business activity in the eurozone improved in February despite the disruption from the virus outbreak. In particular, the slump in Germany's manufacturing sector seemed to ease, though the ultimate impact of the outbreak on companies remains still unclear.
On Wall Street, the futures for the benchmark S&P 500 index and for the Dow Jones Industrial Average both lost 0.3%.
In Asia, Tokyo's Nikkei 225 declined 0.4% to 23,386.74 and Hong Kong's Hang Seng sank 1.1% to 27,308.81. In Seoul, the Kospi lost 1.5% to 2,162.84.
The Shanghai Composite Index bucked the regional trend, climbing 0.3% to 3,039.67.
The S&P-ASX 200 in Sydney lost 0.3% to 7,139.00. New Zealand advanced while Southeast Asian markets declined.
A measure of Japan's manufacturing activity tumbled to an eight-year low and a companion gauge of service industries dropped even more sharply.
The decline "underlines that the coronavirus has started to weaken activity," Marcel Thieliant of Capital Economics said in a report.
The airline industry association estimated that the virus outbreak will cost the sector some $29 billion in revenue.
To contain the disease, China starting in late January cut off most access to Wuhan, the central city where the first cases occurred, and extended the Lunar New Year holiday to keep factories and offices closed and workers at home.
Some Chinese factories and other businesses are reopening but restrictions that in some areas allow only one member of a household out each day still are in place. Forecasters say auto manufacturing and other industries won't return to normal until at least mid-March.
A rise in new cases in Beijing, the capital, "raises alarm" because it suggests major Chinese cities "may be under pressure to contain the virus amidst returning workers" as companies reopen, Mizuho Bank said in a report.
In energy markets, the benchmark U.S. crude contract lost $1.00 to $52.88 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 49 cents on Thursday. Brent crude oil, the international standard, lost $1.13 to $58.18 per barrel in London. It rose 19 cents the previous session.
The dollar declined to 111.87 yen from Thursday's 112.09 yen. The euro rose to $1.0807 from $1.0790.
Business in the 19-country eurozone has picked up in February from a deep slump, particularly in Germany's big industrial sector, despite disruption from the new coronavirus, a report showed Friday.
A survey of business managers by financial firm IHS Markit showed that the economy expanded in February at its fastest rate in six months as services grew and trouble in manufacturing eased.
The group's PMI index, a gauge of business activity, rose to 51.6 points from 51.3 in January. The index is on a 100-point scale, with the 50-mark separating growth from contraction.
Chris Williamson, chief business economist at IHS Markit, said the expansion "is being led by welcome resilience in the service sector but manufacturing is also showing encouraging signs of pulling out of the downturn that has plagued producers for over a year."
New business orders remained constrained, however, amid global uncertainties that have weighed on world economic growth over the past few months — particularly trade uncertainties like Brexit and the U.S.-China tariffs wars. At the end of last year, the eurozone economy barely grew while Japan's shrank sharply and the U.S. and China slowed.
The survey also showed that the virus outbreak, which originated and largely affected China, hurt travel, tourism and delayed supplies to businesses.
Williamson said the full impact of the virus outbreak is not yet clear.
"The outlook remain highly uncertain," he said.