Dow futures tumbled 1,000 points late Wednesday after President Trump said in a nationally televised address that all travel from Europe to the U.S. is banned for 30 days to limit the spread of the coronavirus.
Standard & Poor’s 500 futures fell 3.5%. The drops in pre-market trading likely heralded more turmoil for markets Thursday.
The speech came amid a cascade of negative headlines late Wednesday. The NBA canceled its season after a player tested positive for coronavirus, and just hours earlier, the Dow Jones industrial average ended its historic 11-year bull run on Wednesday by falling into a bear market.
The travel restriction is likely to further hammer the earnings of battered airlines and hotel companies and hurt consumer spending, which makes up 70% of the economy, says Ryan Dietrich, senior market strategist at LPL Financial.
“It sure seems like to travel ban was a drastic measure that caught even the overall market off-guard,” Detrick says.
The International Air Transport Association, which represents global airlines, last week boosted its estimates of the global financial hit from COVID-19 from $29.3 billion to between $63 billion and $113 billion as the bookings falloff has spread beyond Asia.
That would put airlines in their most precarious position since after the Sept. 11, 2001, terrorist attacks. In the U.S. alone, the travel industry lost $40 billion from 2001 to 2005.
Also at risk is the cruise industry, which has been one of the hotspots of virus outbreaks. Cruise companies had a $52 billion impact on the U.S. economy in 2018, up 10% from 2016, the Cruise Lines International Association, a trade group, reported last year. Cruise ships carried 12.68 million U.S. passengers, supported more than 400,000 jobs and paid $23 billion in wages.
The travel ban announced by Trump, and the NBA’s decision Wednesday to cancel the rest of its season, also could herald a sharper-than-expected pullback in household consumption.
“Is the consumer going to continues to spend money when their hold up in their homes?” Detrick asked.