Dow Industrials Fall More Than 400 Points
February 25 2020 - 1:25PM
Dow Jones News
By Caitlin Ostroff and Akane Otani
A rout in global financial markets deepened Tuesday, sending the
Dow Jones Industrial Average down more than 400 points and Treasury
yields sliding to fresh lows.
For much of the past several weeks, investors have been fixated
on one issue: the potential for a growing coronavirus epidemic to
hit economic activity around the world.
Hope that health officials would be able to contain the
epidemic, resulting in only a short-term disruption to economic
activity, had helped keep stocks near all-time highs up until just
last week. But in the past few days, that optimism has increasingly
turned into skepticism -- sending stocks, oil prices and bond
yields sliding.
Tuesday's selling accelerated after reports showed the disease
had spread even further, with countries from Switzerland to Austria
to South Korea reporting new infections.
The Dow Jones Industrial Average was down 447 points, or 1.6%,
to 27523, near their lows for the day. The S&P 500 dropped
1.6%, while the Nasdaq Composite lost 1.4%.
Meanwhile, the yield on the benchmark 10-year U.S. Treasury
note--used as a reference rate for everything from mortgages to
student loans--was at 1.330% after briefly falling below a record
intraday low of 1.325%.
"The size of this economic shock is looking increasingly large
on a global scale," said James Athey, a senior investment manager
at Aberdeen Standard Investments. "What we're just seeing here is
the crack in that sentiment-driven equity rally."
Among the biggest decliners in the stock market Tuesday: shares
of companies whose profits are vulnerable to slowdowns in consumer
spending and travel.
Bank stocks retreated, with Citigroup, Goldman Sachs and Bank of
America all down at least 1%. The continued slide in long-term bond
yields threatens to cut into banks' lending profitability.
Energy shares also tumbled. The S&P 500 energy sector is
trading down 17% for the year, hurt by fears that a slowdown in
global economic activity will drag oil prices lower.
Meanwhile, traders placed bets on further volatility. The Cboe
Volatility Index, which tracks expectations for swings in the
S&P 500, jumped 2.4% to bring its year-to-date gain to 86%.
"I just don't think we can accept the numbers coming out of
China at face value," said Mark Grant, managing director and chief
global strategist at B. Riley FBR.
With little clarity on the severity of the epidemic, as well as
uncertainty about if officials will be able to effectively contain
it, Mr. Grant said he wouldn't be surprised if there was further
volatility across markets.
Elsewhere, the Stoxx Europe 600 traded down 1.8% after having
fallen more than 3% Monday.
Trading in Asia was mixed Tuesday.
South Korea's Kospi closed 1.2% higher, while China's Shanghai
Composite Index ended the day down 0.6%. Japan's Nikkei Stock
Average, which was closed Monday, fell 3.3%.
"This virus doesn't respect borders. There's no real reason to
expect it's going to be easy to contain," said Jan Lambregts,
global head of financial markets research at Rabobank. "The real
economic impact of this is going to be felt."
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Akane
Otani at akane.otani@wsj.com
(END) Dow Jones Newswires
February 25, 2020 13:10 ET (18:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.