U.S. stocks posted their worst day since October on Monday, as fears over the spread of a deadly outbreak of coronavirus rattled Wall Street.
Investor fears grew on the potential economic fallout from the outbreak. The death toll in China has climbed to 81, according to Chinese officials. More than 100 people in 26 states are being monitored for the virus, a U.S. health official said Monday.
The National Health Commission said more than 2,700 people are infected. More than 40 of those cases have been confirmed in a dozen other countries, including five in the U.S.
The latest developments sent stocks tumbling worldwide, hitting everything from airlines to resort operators.
“The coronavirus is the number one threat to financial markets currently as global investors are becoming jittery on the uncertainty,” Nigel Green, chief executive and founder of financial consultancy deVere Group, said in a note.
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The Dow Jones industrial average dropped 453.93 points, or 1.6%, to close at 28,535.80. The Standard & Poor’s 500 slid 1.6% to end at 3,243.63. The technology-heavy Nasdaq Composite shed 1.9% to finish at 9,139.31.
The Dow and S&P 500 recorded their worst one-day drop since October while the Nasdaq logged its biggest fall since August.
Casino, airline and retail stocks slump
Casino companies with resorts in China came under pressure. Shares of Wynn Resorts, Las Vegas Sands and MGM Resorts International dropped 8.1%, 6.8% and 3.9%, respectively. Travel-related stocks including Carnival, Expedia and Marriott International each dropped at least 2.1%.
Retail companies that generate revenues from China also slid. Estee Lauder lost 4.1% and Nike fell 1.8%.
Airline stocks tumbled as the outbreak triggered travel bans. American Airlines fell 5.5% and Delta dropped 3.4%.
While travel and retail stocks will likely come under further pressure, most investors who have a diversified portfolio should still avoid knee-jerk reactions to the latest coronavirus news, Green cautioned.
“History teaches us that most issues of this kind have a short-term impact on stock markets,” Green says.
Randy Swan, chief executive and lead portfolio manager at Swan Global Investments, agrees.
“Right now, we’re still in a speculative phase with regard to handicapping how much the virus will ultimately impact the global economy or even corporate profits in travel-linked sectors,” Swan said in a note.
Wall Street eyes earnings season
Investors turned their attention to this week’s earnings calls to assess how the outbreak could potentially weigh on corporate profit growth. Earnings season is in full swing, with roughly 40% of S&P 500 companies set to report fourth-quarter results this week. Those companies include Apple, Boeing, Microsoft, Facebook and Amazon.
Oil prices fell, weighing on energy stocks. Concho Resources, Schlumberger and Halliburton lost at least 4.5% each.
U.S. crude dropped 1.9% to settle at $53.14 a barrel, its lowest closing price since mid October.
Investors have shifted money to safe-haven corners of the market like high-dividend paying stocks, the Japanese yen and government bonds.
The yield on the benchmark U.S. 10-year Treasury note fell to 1.61% from 1.68% Friday.
Most markets in Asia were closed for the Lunar New Year. Japan’s Nikkei 225 lost 2%. The pan-European Stoxx 600 fell 2.3% while Germany’s DAX slumped 2.7%.