Dow Industrials Fall Sharply, Now On Pace to Close at a 10% Correction
February 27 2020 - 4:23PM
Dow Jones News
By Caitlin Ostroff, Chong Koh Ping and Karen Langley
U.S. stocks deepened their losses Thursday as investors braced
for the spreading coronavirus to slow business activity and depress
corporate earnings.
The Dow Jones Industrial Average fell 3.7%, about 1000 points,
and the Nasdaq Composite slid 3.9%. The S&P 500 was down 3.8%,
all near the lows on the day. If the indexes maintain those losses,
they will close the session down more than 10% from their recent
highs, a decline known as a correction.
If the S&P 500 were to close below the correction threshold,
it would be the broad U.S. stock index's fastest decline into
correction territory from an all-time high in data going back to
1980, according to Dow Jones Market Data.
All three indexes were in negative territory for the year after
punishing losses this week. Investors have grown increasingly
worried about the potential economic impact of the virus as it
emerges in new locations.
"Obviously it's a bloodbath," said David Bahnsen, chief
investment officer of The Bahnsen Group, a wealth-management firm.
"When you get into a free-fall mode, there's really little that can
be done but wait for some sort of footing to be found."
Some U.S. companies say they could lose as much as half their
annual revenue from China if the coronavirus epidemic extends
through the summer. American businesses will generate no earnings
growth in 2020 if the virus becomes widespread, Goldman Sachs
Group's equity analysts warned on Thursday.
"We have to brace ourselves for wave after wave of earnings
downgrades," said Paul O'Connor, head of multiasset at Janus
Henderson Investors. "The globalization of the virus extinguishes
confidence in the V-shaped recovery that was the view last
week."
Microsoft warned Wednesday that supply-chain disruptions from
the coronavirus would hurt sales this quarter, making it the second
major tech company -- after Apple -- to lower expectations because
of the epidemic.
With Thursday's losses, only one sector of the S&P 500 --
the utilities group -- was sitting in positive territory for the
year. The stock index as a whole was down 6.2% for 2020.
European indexes also dropped, with the Stoxx Europe 600
tumbling 3.7%. In Asia, Japan's Nikkei 225 closed 2.1% lower, while
South Korea's Kospi declined 1%.
Investors continued to seek the safety of government-bond
holdings. The yield on the benchmark 10-year U.S. Treasury, which
closed at a record low of 1.310% on Wednesday, fell to 1.299%
Thursday, according to Tradeweb. Yields move inversely to bond
prices.
A key measure of turbulence in U.S. stocks also rose Thursday,
with the Cboe Volatility Index, or VIX, jumping to 33.27, its
highest level since December 2018. The options-based gauge tends to
rise when markets fall and investors reach for insurance-like
contracts to protect their portfolios.
"It's very scary on a personal level, and I think that
psychology pervades through the market" said Sam Hendel, president
and portfolio manager at Levin Easterly Partners. "As an investor,
my job is to keep a cool head."
More than 82,000 people have been infected by the virus and the
death toll stands at more than 2,800 globally. On Wednesday,
American authorities said a patient in California might be the
first U.S. coronavirus case to be diagnosed without a clear
explanation for how the disease was transmitted.
"Everyone is now trying to assess what the economic impact will
be," said Neil Dwane, global strategist at Allianz Global
Investors. "The U.S. is looking at Europe and Japan as evidence of
how the world is responding."
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com, Chong Koh
Ping at chong.kohping@wsj.com and Karen Langley at
karen.langley@wsj.com
(END) Dow Jones Newswires
February 27, 2020 16:08 ET (21:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.