Dow Industrials Fall Sharply, Now On Pace to Close at a 10% Correction
February 27 2020 - 10:03AM
Dow Jones News
By Caitlin Ostroff and Chong Koh Ping
Global stocks, U.S. government bond yields and oil prices
tumbled Thursday, extending losses as investors braced for a drop
in business activity and corporate earnings following the spread of
the coronavirus.
The Dow Jones Industrial Average fell almost 2%, or 505 points,
in early trading, putting the index on track to close the day more
than 10% below its recent high. Such a move would be considered a
correction.
The gauge has dropped for five straight days, and has now shed
7% this year.
European indexes also dropped, with the Stoxx Europe 600
tumbling 3.4%. The pan-continental gauge is down almost 10% from
its 52-week high. In Asia, Japan's Nikkei 225 closed 2.1% lower,
while South Korea's Kospi declined 1%.
Investors continued to seek out the safety of government-bond
holdings. The yield on the benchmark 10-year U.S. Treasury, which
closed at a record 1.310% on Wednesday, dropped to 1.276% Thursday,
according to Tradeweb. Yields move inversely to bond prices.
Markets have reflected increasing pessimism this week about the
potential economic impact as the virus emerges in new locations.
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."
A key measure of turbulence in U.S. stocks also rose Thursday,
with the Cboe Volatility Index, or VIX, jumping to 30.54, 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.
"The global fear factor has become stronger due to the warnings
coming out from the U.S.," said Song Seng Wun of CIMB Private
Banking in Singapore. "And as recession risks grow, the markets
have become more jittery."
Brent crude, the global oil benchmark, fell 2.8% to $51.36 a
barrel, reflecting anxiety about the demand for energy if growth
prospects sour. Gold, considered a haven asset during times of
turmoil in markets, rose 0.7%.
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."
The ICE Dollar Index, which tracks the greenback against a
basket of currencies, fell 0.4%.
Among European stocks, Anheuser-Busch InBev SA was one of the
worst performers, with shares falling 11.4% after the maker of
Budweiser beer reported lower profit for the fourth quarter,
blaming higher costs and lost market share.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Chong
Koh Ping at chong.kohping@wsj.com
(END) Dow Jones Newswires
February 27, 2020 09:48 ET (14:48 GMT)
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