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Wall Street falls as China virus reaches the US

Airlines, travel stocks hit by China virus fears.
Netflix drops, IBM rises after-hours after posting results. Image: Michael Nagle/Bloomberg

Wall Street lost ground on Tuesday, backing away from record highs as a viral outbreak from China found its way to US shores and the International Monetary Fund (IMF) lowered its global economic growth forecast.

All three major US stock averages fell following several days of record closing highs and their best one-week advance in months.

The indexes extended their losses after the Centres for Disease Control and Prevention confirmed the first US case of the coronavirus, which has now killed six people in China.

“We’re seeing headline risk introduced to the market and any time there’s new uncertainties, we see more volatility and flight to quality and investors fleeing risk assets,” said Charlie Ripley, senior market strategist for Allianz Investment Management in Minneapolis.

“Today’s news around the coronavirus is a reminder that risks remain, and it’s something that investors will be paying attention to in the coming weeks and months,” Ripley added.

With the outbreak occurring just before the Chinese lunar new year, the news hit travel-related stocks the hardest.

The NYSE Arca Airline index dropped 2.8%.

United Airlines fell by 4.4%, while Carnival dipped 2.3%.

Hotel and casino operators Las Vegas Sands and Wynn Resorts, both of which have sizeable operations in China, ended the session down 5.4% and 6.1%, respectively.

Steel stocks, which have a sizeable exposure to China, also fell. United States Steel was down 5.2%.

Boeing weighed heaviest on the blue-chip Dow, its shares falling 3.3% following reports the planemaker’s 737 MAX might not win approval to return to service until June or July.

In other news, the IMF trimmed its global economic growth forecasts for 2020 and 2021, with Managing Director Kristalina Georgiev citing lasting effects from the bruising US-China trade war and sharper-than-expected slowdowns in India and other emerging markets.

The Dow Jones Industrial Average fell 152.06 points, or 0.52%, to 29 196.04, the S&P 500 lost 8.82 points, or 0.26%, to 3  320.8 and the Nasdaq Composite dropped 18.14 points, or 0.19%, to 9 370.81.

Of the 11 major sectors in the S&P 500 seven ended the session in the red, with energy, industrials, and materials suffering the largest percentage drops.

Real estate led the gainers.

Fourth-quarter earnings season continues apace, with 46 of the companies in the S&P 500 having reported. Of those, 71.7% have beaten analyst expectations.

Members-only chain store Costco Wholesale advanced 2.8% after Oppenheimer upgraded the shares to “outperform.”

Intel gained 1.6% after three brokers raised their price targets for the chipmaker’s shares.

Electric automaker Tesla rose 7.2% after new Street Research hiked its price target to $800 per share.

Netflix Inc shares fell more than 1% in after-hours trading after posting fourth-quarter results.

International Business Machines rose more than 4% after the bell after reporting a surprise revenue increase on cloud growth.

Declining issues outnumbered advancing ones on the NYSE by a 1.56-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favoured decliners.

The S&P 500 posted 89 new 52-week highs and two new lows; the Nasdaq Composite recorded 140 new highs and 37 new lows.

Volume on US exchanges was 8.13 billion shares, compared with the 7.02 billion-share average over the last 20 trading days. 

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I’m not buying this. SP500 came to a technical high point and definitely did not fall because of this. In fact it’s trading higher than yesterday with no different than normal divergence.

End of comments.

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