U.S. equities extended losses after the U.S. Centers for Disease Control and Prevention warned Americans to prepare for a coronavirus outbreak at home.
Wall Streets three major stock indexes fell almost 2 per cent as the coronavirus spread further around the world and officials described it as a rapidly escalating epidemic, a day after the S&P 500 and the Dow Industrials biggest daily decline in two years. Treasuries gained.
After opening positive, the benchmark index turned lower in the wake its largest loss in two years on Monday. Energy, material and financial shares led the declines. Ten-year Treasury yields resumed a push to record-low levels. European stocks extended losses, while bonds from the region were mixed. Crude oil pushed lower again after Monday’s slide of nearly 4 per cent.
“It’s the realization that the market was not going to bounce like it usually does after a severe one-day decline,” said Matt Maley, an equity strategist at Miller Tabak & Co. “Once that become obvious, the short-term traders started selling and the long-term investors pulled in their horns.”
At 1:17 p.m. ET, the Dow Jones Industrial Average fell 526.5 points, or 1.88 per cent, to 27,434.3; the S&P 500 lost 58.35 points, or 1.81 per cent, to 3,167.54; and the Nasdaq Composite dropped 149.37 points, or 1.62 per cent, to 9,071.91.
U.S. stock indexes were on track for their biggest 4-day percentage drop since December 2018. Fears of a pandemic had knocked off more than 3 per cent on Monday and erasing the S&P 500 and the Dows gains for the year-to-date.
Declines in banks and food producers dragged the Stoxx Europe 600 index lower. Japanese shares tumbled more than 3 per cent as traders returned after a holiday, though the decline was less than the two-session slide on Wall Street while they were away. Stocks fell in China and Australia and pushed higher in South Korea and Hong Kong. The yen strengthened against the dollar for a third day.
Erratic market moves suggest investors remain on edge over the economic impact of the virus. The World Health Organization has held off from declaring a global pandemic even as cases surged in South Korea, Italy and Japan. Some traders may be taking encouragement from news about the development of treatments, even if experts warn it would take time to build stocks of medicines. Fujifilm Holdings Corp. and Moderna Inc. are among companies experimenting with treatments or vaccines.
“The markets are pricing in the what ifs of the coronavirus, not necessarily exactly what is,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co.
Analysts at Oxford Economics Ltd. said the epidemic could wipe more than US$1 trillion from global domestic product, while the International Monetary Fund lowered its growth forecasts for the world economy.
Elsewhere, iron ore futures fell as steel inventories surged to a record in China and investors continued to weigh the impact of the coronavirus outbreak. Gold retreated from the highest level since 2013.
Bloomberg.com, with files from Reuters