U.S. stocks slid on Tuesday as a virus outbreak in China rattled global markets, prompting investors to shift assets into bonds and defensive sector companies.
All three major U.S. stock averages fell following several days of record closing highs and their best one-week advance in months. The sell-off snapped a three-day winning streak by the S&P 500.
The indexes extended their losses after the Centers for Disease Control and Prevention confirmed the first U.S. case of the coronavirus, which has now killed six people in China.
‘We’re seeing headline risk introduced to the market and any time there’s new uncertainties, we see more volatility and flight to quality and investors fleeing risk assets,’ said Charlie Ripley, senior market strategist for Allianz Investment Management in Minneapolis.
Trader Peter Tuchman works on the floor at the New York Stock Exchange on Tuesday. All three major U.S. stock averages fell following several days of record closing highs
‘Today’s news around the coronavirus is a reminder that risks remain, and it’s something that investors will be paying attention to in the coming weeks and months,’ Ripley added.
The Dow Jones Industrial Average fell 152.06 points, or 0.52 percent, to 29,196.04, the S&P 500 lost 8.82 points, or 0.26 percent, to 3,320.8 and the Nasdaq Composite dropped 18.14 points, or 0.19 percent, to 9,370.81.
Investors worried that the new coronavirus spreading in the world´s second-largest economy could hurt tourism and ultimately economic growth and corporate profits.
Six people have died, and 291 have been infected in China, just as people in the country were preparing to make billions of trips for the Lunar New Year travel season. And a U.S. citizen who recently returned from China was diagnosed with the new virus in the Seattle area, making the United States the fifth country to report a case, following China, Thailand, Japan and South Korea.
With the outbreak occurring just before the Chinese lunar new year, the news hit travel-related stocks the hardest.
The Dow Jones Industrial Average fell 152.06 points, or 0.52 percent, to 29,196.04 on Tuesday
United Airlines fell by 4.4 percent, while Carnival Corp dipped 2.3 percent.
Hotel and casino operators Las Vegas Sands Corp and Wynn Resorts Ltd, both of which have sizable operations in China, ended the session down 5.4 percent and 6.1 percent, respectively.
Steel stocks, which have a sizable exposure to China, also fell. United States Steel Corp was down 5.2 percent.
Boeing Co weighed heaviest on the blue-chip Dow, its shares falling 3.3 percent following reports the plane maker’s 737 MAX might not win approval to return to service until June or July.
Along with travel, banks, industrial and energy stocks accounted for a big share of the selling. Those losses outweighed gains in real estate stocks, utilities and household goods makers. Traders also shifted money into U.S. government bonds, sending yields lower.
‘From an investment standpoint, the risk with any virus is in the scope of its economic impact, and the mere fact that this has spread from China overnight to the U.S. so quickly reinforces the idea that the negative fallout could be global rather than local,’ said Alec Young, managing director of Global Markets Research for FTSE Russell.
A total of 325 people are confirmed to have caught the illness, with another 54 cases suspected and more than 900 people under observation (Pictured: The most recently available breakdown of where cases have been diagnosed)
The selling began early in the first trading day of a holiday shortened week and followed sell-offs overnight in Asian markets and downbeat trading in Europe.
China confirmed many people’s fears late Monday when a government expert said that the new type of coronavirus affecting the country can transmit from human to human, increasing its potential spread.
The outbreak ‘is developing into a major potential economic risk to the Asia-Pacific region,’ said Rajiv Biswas of IHS Markit in a report.
Biswas pointed to the example of the 2003 outbreak of severe acute respiratory syndrome, whose economic impact was felt as far away as Canada and Australia.
To cope, investors were looking at playbooks for past outbreaks, such as SARS in 2002-2003, where airlines, railways and other transportation companies saw their stocks slide the most, followed by retailers and hospitality companies, according to strategists at Jefferies.