By Karen Langley, Caitlin Ostroff and Chong Koh Ping
The February market rout deepened Thursday, as major stock
indexes around the globe posted another round of significant
declines and uncertainty over the impact of the coronavirus began
shading into fear.
All three major U.S. indexes slipped into correction territory
-- a drop of at least 10% from a recent peak -- and posted their
biggest one-day point drops ever.
The Dow industrials tumbled 1,190.95 points, or 4.4%, to
25766.64, bringing its slide this week to more than 3,200 points.
The S&P also declined 4.4%, while the tech-heavy Nasdaq
Composite lost 4.6%.
The S&P 500 and Nasdaq notched their largest one-day
percentage declines since August 2011 and the S&P, now down 12%
from its Feb. 19, peak, entered a correction from an all-time high
at a record speed, only six trading days.
Selling was broad based, with some energy and technology
companies showing especially large declines. Shares that until last
week were market highfliers posted double-digit percent losses,
with Tesla Inc. sliding 13% and Virgin Galactic Holdings shedding
24%. Traders described an atmosphere of apprehension, with many
fixating on headlines about the coronavirus epidemic, bracing for a
drop in business activity and trying to get a grip on expectations
for corporate earnings.
"Obviously it's a bloodbath," said David Bahnsen, chief
investment officer of Bahnsen Group, a wealth-management firm.
"When you get into a free-fall mode, there's really little that can
be done but wait for some sort of footing to be found."
Oil prices dropped more than 2%, with Brent crude settling at
its lowest level since December 2018.
The technology sector, which until recently was leading the
S&P 500's gains, lost 5.3% Thursday and is down 12% this
week.
Even utilities and consumer staples shares -- which investors
typically flock to during volatility because of their generous
dividend payments -- were hit by the selling.
All 11 sectors of the S&P 500 are in negative territory for
the year. Investors sought the relative safety of government bonds,
sending the yield on the benchmark 10-year Treasury note to record
lows.
The S&P 500 fell 137.63 points to finish 12% below its
record close on Feb. 19. Its six-session skid since the record
marked the fastest-ever descent into a correction from an all-time
high, according to Dow Jones Market Data. The technology-heavy
Nasdaq Composite dropped 414.29 points to 8566.48.
The list of fastest corrections comes with some limitations. It
tracks the quickest 10% declines in the S&P 500 following an
all-time high -- a caveat that excludes some of the epic episodes
in markets, including the Oct. 19, 1987, crash that sent the Dow
tumbling 22.6% in one day, the most ever. The market had gone into
correction the previous week, eliminating that day from
consideration by this measure.
At the same time, the precipitous nature of the decline this
month has grabbed the attention of traders and portfolio managers
in a way that few previous selloffs have during the market's
decadelong run to new highs.
Investors have grown increasingly pessimistic that efforts to
stop the spread of the virus will prevent significant damage to the
global economy. 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.
"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."
Microsoft Corp. warned Wednesday that supply-chain disruptions
from the coronavirus would hurt sales this quarter, making it the
second major tech company -- after Apple Inc. -- to lower
expectations because of the epidemic.
European indexes also dropped, with the Stoxx Europe 600
tumbling 3.7%. In Asia, Japan's Nikkei 225 closed 2.1% lower, while
South Korea's Kospi declined 1.1%.
Government bonds continued to rally. The yield on the benchmark
10-year U.S. Treasury, which closed at a record low 1.310% on
Wednesday, dropped to 1.296% Thursday, according to Tradeweb.
Yields move in the opposite direction of bond prices.
A measure of turbulence in U.S. stocks also rose, with the Cboe
Volatility Index, or VIX, jumping to a multiyear high of 39.16.
The options-based gauge tends to rise when markets fall and
investors reach for insurancelike contracts to protect their
portfolios.
"It's very scary on a personal level, and I think that
psychology pervades through the market" said Sam Hendel, president
and portfolio manager at Levin Easterly Partners. "As an investor,
my job is to keep a cool head."
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."
Write to Karen Langley at karen.langley@wsj.com, Caitlin Ostroff
at caitlin.ostroff@wsj.com and Chong Koh Ping at
chong.kohping@wsj.com
(END) Dow Jones Newswires
February 27, 2020 19:37 ET (00:37 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.