Dow Falls 152 Points on China Virus Fears
January 21 2020 - 5:14PM
Dow Jones News
By Steven Russolillo and Avantika Chilkoti
Stocks declined Tuesday after the first reported case in the
U.S. of a dangerous pneumonialike virus that originated in central
China.
Federal health officials said a man in Washington State has been
diagnosed with the new Wuhan coronavirus, the first case to be
confirmed in the U.S. in an outbreak that has sickened hundreds of
people in Asia.
The Dow Jones Industrial Average dropped 152.06 points, or 0.5%,
to 29196.04, its first decline in six sessions. The S&P 500
fell 8.83 points, or 0.3%, to 3320.79. The Nasdaq Composite lost
18.14 points, or 0.2%, to 9370.81. All three indexes have hit a
series of repeated highs in the weeks since the U.S. and China
indicated progress on a trade deal.
The Dow was also weighed down by a slide in shares of Boeing,
which dropped $10.78, or 3.3%, to $313.37. The aerospace giant said
it expects its 737 MAX jet will be grounded through mid-2020,
following last year's fatal crashes.
The stock remains the second most expensive stock in the
price-weighted index, which means moves in its share price can have
a disproportionately large effect on the Dow's overall change.
The benchmarks followed their overseas counterparts lower
Tuesday. The pan-continental Stoxx Europe 600 index lost 0.1%. The
Shanghai Composite dropped 1.4%, its biggest drop in more than two
months, and the Chinese yuan lost 0.6% against the dollar in
offshore trading.
Investors are concerned the coronavirus could quickly be
transmitted across Asia as millions of Chinese travel for the
annual Lunar New Year holiday. More than 300 people have been
sickened and at least six have died. A similar disease led to the
outbreak of severe acute respiratory syndrome, or SARS, in late
2002 in southern China, killing 774 people.
"The economic consequences could be extremely concerning," said
Rajiv Biswas, chief economist for the Asia-Pacific region at IHS
Markit. "China's international tourism has boomed, so the risks of
a global SARS-like virus epidemic spreading globally have become
even more severe."
Although a deadly virus is itself concerning, the equities
market was primed for a selloff after such a steady ascent, said
Naeem Aslam, chief market analyst at U.K. brokerage AvaTrade.
"The market was looking for an excuse to sell off," he said.
"Whenever you're sitting at record highs, retracement's always in
the air."
He said he was more interested in the message sent to the
Federal Reserve by President Trump from Davos. In his speech at the
World Economic Forum, the president pressured the Fed to cut rates
more than they already have.
"It's what the smart money is looking at," Mr. Aslam said. "Once
that message becomes very public and very clear, it means we will
have an enormous tailwind for stocks."
That message didn't make a dent on Tuesday. Shares of companies
that could be more directly affected by the virus' spread were
mostly lower. MGM Resorts International, Wynn Resorts and Las Vegas
Sands dropped more than 5%. American Airlines and United Airlines
Holdings fell more than 4%.
"Global asset markets have been pricing in this blue-sky
scenario: there wasn't a cloud in the sky," said Cliff Tan, East
Asian head of global markets research at Japanese bank MUFG. "Now
we have a cloud."
Hong Kong's Hang Seng benchmark was the worst performer among
major Asian benchmarks, falling 2.8% in its biggest decline in more
than five months. Adding to the gloom in Hong Kong, Moody's
Investors Service downgraded the city's credit rating. The ratings
firm blamed the government for failing to properly deal with seven
months of social unrest, which has driven the economy into
recession.
Within commodities markets, copper prices fell 1.8%, the biggest
fall in four months, on concerns about the impact of the virus on
China's economy.
Paul Vigna contributed to this article.
Write to Steven Russolillo at steven.russolillo@wsj.com and
Avantika Chilkoti at Avantika.Chilkoti@wsj.com
(END) Dow Jones Newswires
January 21, 2020 16:59 ET (21:59 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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