Wall Street's three major averages plunged on Monday as investors ran for safety after a surge in coronavirus cases outside China fanned worries about the global economic impact of a potential pandemic.
Investors sold riskier assets and rushed to traditionally safer bets such as gold and U.S. Treasuries after countries including Iran, Italy and South Korea reported a rise in virus cases over the weekend even as China eased curbs with no new cases reported in Beijing and other cities.
The benchmark S&P 500 index and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points, only the third time in its history for such a large decline in one day. Both the Dow and the S&P clocked their biggest one-day percentage declines since February 2018.
The technology heavy Nasdaq had the biggest percentage drop, down 3.71%.
"We're not likely to make any progress higher until we have evidence the spread of the coronavirus is decelerating," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
The Dow Jones Industrial Average fell 1,031.61 points, or 3.56%, to 27,960.8, the S&P 500 lost 111.86 points, or 3.35%, to 3,225.89 and the Nasdaq Composite dropped 355.31 points, or 3.71%, to 9,221.28.
All of the 11 major S&P sectors closed in the red, led by the energy sector's 4.7% decline and followed by a 4.2% drop in technology stocks.
Apple Inc slid 4.8% as data showed sales of smartphones in China tumbled by more than a third in January.
China-exposed chipmakers fell, with the Philadelphia SE Semiconductor index dropping 4.8%, while concerns about growing travel curbs dragged the NYSE Arca Airline Index down 6%.
Of the S&P's sectors, the defensive utilities, real estate and consumer staples indexes fell the least on the day.
Treasury yields fell to their lowest levels since 2016 as investors sought safety in government bonds, while the yield curve inversion between the 3-month and 10-year U.S. Treasuries deepened in what is often viewed as a recession predictor.
Adding to worries, Goldman Sachs slashed its U.S. growth forecast on Sunday and predicted a more severe impact from the epidemic.
The CBOE Volatility Index, a gauge of investor anxiety, registered its biggest one-day jump since February 2018 and ended the day at 25.03, its highest closing level since January 2019.
"There was this underlying concern that was out there, and obviously over the weekend, it just escalated," said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management in Philadelphia.
Wall Street's three main indexes had notched record highs last week, partly on optimism that the global economy, supported by central banks, would be able to snap back after short-term weakness related to the virus.
The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched technical indicators.
Health insurers such as UnitedHealth Group Inc and Cigna Corp dropped almost 8% after Senator Bernie Sanders, who backs the elimination of private health insurance, strengthened his position for the Democratic presidential nomination with a victory in the Nevada caucuses.
Janney Montgomery Scott's Luschini said that while the coronavirus was "by far and away the primary influence" for the market's decline on Monday, investors, he said, were "also beginning to handicap the odds of Sanders being the Democratic nominee."
In a rare bright spot, Gilead Sciences Inc, whose antiviral remdesivir has shown promise in monkeys infected by a related coronavirus, rose 4.6%.
Declining issues outnumbered advancing ones on the NYSE by a 6.74-to-1 ratio; on Nasdaq, a 6.02-to-1 ratio favored decliners.
The S&P 500 posted seven new 52-week highs and 23 new lows; the Nasdaq Composite recorded 21 new highs and 154 new lows.
On U.S. exchanges, 10.51 billion shares changed hands, compared with the 7.79 billion average for the last 20 sessions.
Meanwhile, global stocks fell by the most in two years on and oil prices tumbled as a jump in coronavirus cases outside of China drove investors to the perceived safety of gold and government bonds on fears of the impact to the global economy.
Spot gold prices rose for a fifth straight session and touched a 7-year high while the U.S. 30-year Treasury bond yield set a record low. MSCI's global gauge of stocks was down 2.8%.
Despite the spike in coronavirus cases reported in Italy, South Korea and Iran, the head of the World Health Organization said that "using the word 'pandemic' now does not fit the facts but may certainly cause fear."
"We must focus on containment while preparing for a potential pandemic," Tedros Adhanom Ghebreyesus told reporters in Geneva, adding that the world was not witnessing an uncontained spread or large-scale deaths.
Concerns over the hit to economic growth and uncertainty over the stress to supply chains triggered selling in stocks and other high-risk assets.
"It is not as though the numbers have changed dramatically; but what has changed is the geography, which adds a new level of concern," said Art Hogan, chief market strategist at National Securities in New York.
"What the market is trying to predict here is 'How large will this get globally, and when will it start to peak?'"
The pan-European FTSEurofirst 300 index lost 3.76% with Milan's stock market down over 5% after a spike in cases of the virus left six dead in Italy and parts of the country's industrial north in virtual lockdown.
MSCI's gauge of stocks across the globe shed 2.92%, its biggest single-day decline since June 24, 2016.
Emerging market stocks lost 2.66%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.57% lower, while futures in Japan's Nikkei fell over 4%.
The virus has now killed more than 2,500 people in China, which has reported some 77,000 cases, and spread to 29 other countries and territories, with a death toll of more than two dozen outside of China, according to a Reuters tally.
Iran, which announced its first infections last week, said it had confirmed 61 cases and 12 deaths, with most cases in the holy city of Qom. Kuwait, Bahrain, Oman, Afghanistan and Iraq reported their first new coronavirus cases, all in people who had been to Iran.
"The idea that the coronavirus has been fully contained has been firmly banished," said Chris Beauchamp, chief market analyst at IG. "This means the economic forecasts of the impact, such as they are, will need to be revised, with a greater impact now to be expected."
SURGE TO SAFETY
U.S. fed fund futures signaled more rate cuts later this year and a near 20% chance of a cut next month.
Benchmark 10-year notes last rose 30/32 in price to yield 1.3705%, from 1.47% late on Friday. The 30-year bond touched a record low yield of 1.811%.
In currency markets the Japanese yen strengthened 0.78% to 110.73 per dollar.
The dollar index fell 0.096%, with the euro up 0.03% at $1.0846.
"Ultimately this is all a risk-off trade," said Marvin Loh, senior global markets strategist at State Street Global Markets.
"When you look at the yen, when you look at the Swissie, when you look at rates, it is risk-off. It's probably reflective, to a certain degree, of the market being a little too sanguine up until now ... so there's an adjustment process around it."
Korea's won was down 1% at 1,219.06 after falling to its weakest level since August 2019. Emerging-market currencies, from Mexico's peso and Turkey's lira to Poland's zloty and Russia's ruble, were all in the red.
Oil pared some of its early losses. U.S. crude fell 3.6% to $51.46 per barrel and Brent was last at $56.38, down 3.62% on the day.
Among the main industrial metals, Copper lost 1.33% to $5,688.50 a tonne.
"As the virus spreads globally, additional downside revisions in oil demand for this year may be required," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
"The accelerated sell-off in the stock market has become difficult for the oil market to ignore," he said.
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