By Anna Hirtenstein and Karen Langley
Stocks and crude oil tumbled Monday as escalating concerns about
the containment of China's viral outbreak reignited global growth
worries.
The Dow Jones Industrial Average fell 455 points, or 1.6%, and
the S&P 500 dropped by the same percentage. The
technology-heavy Nasdaq Composite lost 1.9%. All three indexes
recorded their worst day since at least October.
Uncertainty surrounding the virus jolted a market that had been
unusually calm: The S&P 500 hasn't closed up or down 1% in a
single trading session since mid-October, one of its longest such
streaks since 1969.
"It reminds investors that this market can turn on a dime should
it start to question what was causing it to go higher," said Sam
Stovall, chief investment strategist at CFRA, of the
volatility.
The coronavirus has infected more than 2,700 people and killed
at least 80, mostly in China's Hubei province, with public-health
officials warning that it is growing more contagious. The number of
U.S. cases has risen to five and the government is working to
evacuate American citizens from the epicenter.
"It's unclear how far it could have potentially spread," said
Georgina Taylor, a multiasset fund manager at Invesco. "If it turns
into a global health issue, that's really the next piece of
information that would worry us."
As investors bid down stocks, they bought haven assets such as
government bonds and gold. The benchmark 10-year Treasury yield
fell to 1.610%, its lowest closing level since October. Yields move
inversely to prices.
The Cboe Volatility Index, or VIX, which measures expected moves
in the S&P 500 index, climbed to its highest level since the
start of this year.
U.S. stocks have steadily risen since mid-October when the Trump
administration indicated it was nearing a phase-one trade deal with
Beijing. Meanwhile, improving economic data eased fears about a
manufacturing slowdown bleeding into the broader economy.
Stocks have been trading at relatively high multiples of
earnings, which has made them more vulnerable to pullbacks in
response to negative headlines, said Yousef Abbasi, global market
strategist at INTL FCStone.
"Investors were considering and really looking forward to
improved global growth," he said. "Uncertainty like this causes
people to step back and reassess the amount of risk they're
taking."
While shares of companies in travel-related industries were
among the hardest-hit, investors also sold stocks with less
apparent exposure to the efforts to contain the virus.
"Clearly, the news today is just hit the sell button first and
worry about the details later," said Jack Ablin, chief investment
officer at Cresset Capital.
Kristina Hooper, chief global market strategist at Invesco, said
investors should keep market fundamentals in mind and avoid
panicking.
"Investors would be well-served to stay the course and remain
well-diversified," she said.
In addition to developments around the virus, investors will be
watching a big week of earnings reports from U.S. companies. With
about 17% of S&P 500 companies having reported for the fourth
quarter, 70% have topped analysts' earnings expectations, according
to FactSet. Still, analysts are expecting earnings for the S&P
500 as a whole to drop 1.9% from a year earlier, before climbing
again in the first quarter of 2020.
Shares of D.R. Horton climbed 2% after the home builder beat
expectations for quarterly revenue.
Investors also will be keeping an eye on the Federal Reserve's
meeting Wednesday, though the central bank is expected to hold its
benchmark rate steady.
Overseas, Stoxx Europe 600 retreated 2.3%. Markets in China,
Hong Kong and South Korea were closed Monday for the public
holiday. Japan's Nikkei 225 index closed down 2%.
Hotel, cruise and airline stocks fell on concerns that the
coronavirus could affect global travel. The Chinese government has
imposed restrictions on movement in Hubei province, and the U.S.
Centers for Disease Control and Prevention issued a warning to
avoid nonessential travel to this part of China.
Wynn Resorts lost 8.1%, due to its large presence in gambling
hot spot Macau. Las Vegas Sands was down 6.7%. Royal Caribbean
Cruises fell 7.5%.
Airlines were also big losers. United Airlines Holdings dropped
5.2%, and American Airlines fell 5.5%. Delta Air Lines lost
3.4%.
Miners slumped as investors feared that the virus outbreak could
erode China's demand for industrial commodities. Freeport-McMoRan
fell 8.1%.
Oil prices slumped by the most in more than four months as the
virus outbreak threatens to damp economic growth in China, the
world's biggest energy consumer. Brent crude, the global benchmark,
declined 2.3% to $59.32 a barrel.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Karen
Langley at karen.langley@wsj.com
(END) Dow Jones Newswires
January 27, 2020 16:20 ET (21:20 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.