Dow Falls 152 Points on China Virus Fears

Date : 01/21/2020 @ 10:14PM
Source : Dow Jones News
Stock : Boeing Co (BA)
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Dow Falls 152 Points on China Virus Fears

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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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