Rising anxiety over the global coronavirus outbreak pushed the stock market into a new zone of fear on Thursday.
After falling sharply all week, the Dow Jones industrial average tumbled as much as 960 points on mounting worries that the deadly new virus could be spreading to the U.S. as the number of worldwide cases tops 81,000. Thursday’s losses dropped the blue-chip average into a correction — a decline of 10% from a recent high — for the first time since December 2018. The Dow was recently down 550 points.
The sharp declines have wiped out the Dow’s gains for the year and trillions of dollars from investors’ portfolios in a matter of days. Heading into Thursday, the average was down 7% this week, on track for its worst weekly percentage performance since the depths of the financial crisis in 2008.
Traders are concerned the global economy could stumble as major industrial countries struggle to contain the outbreak. To be sure, the U.S. economy remains strong, driven by record low unemployment, a firming housing market and robust consumer spending, which accounts for more than two-thirds of U.S. economic growth.
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The yield on the 10-year Treasury, a closely watched barometer for the U.S. economy, hit a fresh record low, sliding to 1.25% Thursday, down from 1.34%. The yield on the 3-month Treasury bill edged up to 1.51%. The inversion in the yield between the 10-year and the 3-month Treasurys is a red flag for investors because it has preceded the last seven recessions.
“People who keep trying to call a recession are missing the fact that the U.S. consumer feels comfortable about their financial position,” says Michael Antonelli, market strategist at Baird. “But if the virus spreads and hits U.S. shores, it will absolutely hit household sentiment. Once the U.S. consumer cracks, then the whole story around the stock market starts to falter.”
Financial markets have been spooked by concerns the deadly virus will hinder the longest U.S. economic expansion on record, which is approaching its 11th year. Data released Thursday showed the U.S. economy grew at a moderate 2.1% annualized pace in the fourth quarter, the Commerce Department said in its second estimate.
The Standard and Poor’s 500 dropped 2%, also putting the index into a correction after hitting a record on Feb. 19. The Nasdaq, which slumped 2.3% Thursday, is off more than 10% from its Feb. 19 all-time high.
The latest wave of selling came after President Donald Trump announced late Thursday the U.S. was stepping up its efforts to combat the virus outbreak. Shortly after Trump spoke, the government announced that another person in the U.S. was infected — someone in California who appears not to have the usual risk factors of having traveled abroad or being exposed to another patient.
Trump said he didn’t believe a pandemic was inevitable, though health officials warned more infections are coming.
“The efforts by Trump to calm the markets are being overshadowed by the news from the CDC of a possible transmission of the virus in the U.S.,” Peter Cardillo, chief market economist at Spartan Capital Securities, says in a note. “We continue to recommend staying cautious.”
Investors have been shifting money from stocks into safe havens like gold in the wake of the outbreak. Gold climbed $7.60 to $1,650.70 per ounce.
Germany’s DAX lost 2.2% and the CAC 40 in Paris dropped 2.3%. In London, the FTSE 100 lost 2.5%. Japan’s Nikkei 225 index lost 2.1% while in Australia, the S&P ASX/200 dropped 0.8%. Hong Kong’s climbed 0.3% to 26,778.62.
The Associated Press contributed to this report.