Stocks slump as coronavirus fears spook investors in U.S. and overseas
Stocks sank in U.S. trading on Monday as the impact of the coronavirus spread over the weekend, leaving at least 81 people dead and more than 2,700 others infected in more than a dozen countries.
The Dow tumbled 453 points Monday, or almost 1.6%, to 28,535, wiping out the blue-chip-stock index's gains for 2020 with a fifth straight trading day of losses. The broader S&P 500-stock index and tech-heavy Nasdaq sank 1.6% and 1.9%, respectively — their biggest one-day drops in months.
"Hopes that the virus would be contained were squashed over the weekend," said Ryan Detrick, senior market strategist for LPL financial, of the sell-off. "Although historically these outbreaks have been buying opportunities, the bottom line is investors are taking a sell first and ask questions later approach right now."
With the sharp rise in the number of infected people, China is taking steps to limit travel among its citizens, including a suspension of all tour groups and on the sale of tour group packages for overseas travel, The New York Times reports. That suspension, which begins today, could cast a pall on tourism and consumer spending across the globe.
China has also locked down Wuhan, where the virus originated, and at least 16 other cities, placing more than 50 million people were under travel restrictions in China as of Monday.
"Consumption and travel will be the most affected, and to a lesser degree investment and industrial production," wrote Tommy Wu, senior economist at Oxford Economics, in a research note. "Travel and tourism across the region would be adversely affected as well. With a high share of tourism in GDP and strong reliance on Chinese tourists, Hong Kong, Thailand, Vietnam, Singapore and Philippines seem most at risk."
About 3 million Chinese tourists visited the U.S. in 2018, representing the fifth-biggest source of international tourists to America. Still, that's dwarfed by the ranks of tourists from Canada and Mexico, which represent the largest and second-biggest source of tourism to the U.S, at 21.5 million and 18.4 million visitors that year, respectively, according to data from the National Travel and Tourism Office.
Resort operators were among the biggest losers in the S&P 500 on Monday. Wynn Resorts fell 6.9% and Las Vegas Sands shed 6%. Those companies get the majority of their revenue from the Chinese gambling haven of Macao. MGM Resorts fell 3%.
American Airlines fell 5.2% and Delta slipped 3.8% as part of a broad slide for airlines because of concerns international travel will decline amid the virus' spread.
Travel-booking companies and cruise-line operators are also getting hurt. Expedia Group fell 2.2% and Carnival fell 4%.
Public health warnings
Public health officials from the U.S. and China are warning to expect many more infections, and there have been unconfirmed claims from anonymous health workers in China that many thousands more than their government is acknowledging could already be infected.
It's likely too early to gauge the impact of the coronavirus, Wu of Oxford Economics wrote. Yet many analysts and economists believe the impact will likely be limited, with some pointing to the 2002-2003 SARS epidemic as providing a rough guideline of what to expect.
In that case, SARS had a "notable but short-lived impact on the national economy," resulting in a 1 to 2 percentage point decline in China's GDP growth, the Société Générale analysts wrote last week. But the economy recovered its footing after the disease had been contained, they noted. The SARS epidemic lasted for nine months, from late 2002 into the summer of 2003, and had a death rate of almost 7% of those infected.
"While the outcome of the new virus outbreak is yet unknown, recent history strongly suggests that it will be effectively dealt with if not without tragic individual deaths and economic and market risk near term," Oppenheimer Asset Management chief investment strategist John Stoltzfus told investors in a report.
Still, investors have been rattled as the virus spreads. On Friday, the S&P 500-stock index had its worst day since early October, ending down nearly 1% to 3295. Monday's additional losses of around 1.5% means U.S. stocks could be on track later this week to give up a significant portion of their gains for January.
Authorities believe the virus, which causes flu-like symptoms, likely spread into the human population from an infected animal at a market in Wuhan. Officials have confirmed that the virus has been transmitted person-to-person, but it remains unclear how easy it is to contract from another infected individual, and most virtually all cases thus far can be traced back to Wuhan.
—The Associated Press contributed to this report.