U.S. stocks slumped Friday, ending a two week win streak, as the spread of the COVID-19 epidemic from China to neighboring countries amplified worries about the impact on supply chains and global economic growth.
Tech shares were the biggest loser in the S&P 500 index, with the sector closing down 2% as investors weighed potential fallout resulting from the corornavirus.
How did benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% closed below 29,000, shedding 227.51 points, or 0.8%, at 28,992.40, its worst one-day percentage drop since Feb. 7. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.49% lost 35.48 points, or 1.1%, to settle at 3,337.75, its biggest one-day percentage decline since Jan. 31. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +2.32% lost 174.37 points, or 1.8%, to finish at 9,576.59, its worst single-day percentage fall since Jan. 27, according to Dow Jones Market Data.
For the week, the Nasdaq Composite lost 1.6%, while the Dow fell 1.4% and the S&P 500 shed 1.3%, snapping a two-week win streak for each benchmark.
What drove the market?
Shares of Microsoft Corp . /zigman2/quotes/207732364/composite MSFT +2.11% , Apple Inc . /zigman2/quotes/202934861/composite AAPL +1.98% and Intel Corp . /zigman2/quotes/203649727/composite INTC +2.48% weighed on the Dow, as investors grew increasingly wary about potential fallout from the COVID-19 outbreak.
Stocks also came under pressure after IHS Markit said business in the U.S. contracted in February for the first time in four years owing to disruptions caused by the coronavirus and growing angst over the outcome of the 2020 presidential election. The forecasting firm said its activity indexes for both manufacturers and service-oriented firms declined this month. And the service sector index turned negative for the first time since 2015. In a big surprise, the index covering the large service side of the economy sank 4 points to 49.4, IHS Markit said Friday. A reading of less than 50 indicates a contraction in activity.
The spread of the virus inside and outside of China has been unsettling the market lately, likely contributing to gains in havens like government bonds and gold, with investors showing reluctance to hold on to equities heading into the weekend.
“The coronavirus outbreak contains a significant likelihood of impact to the global economy and the potential to become a black-swan type event,” warned Bank of America Global Research rates strategist Bruno Braizinha, in a client note Friday.
“The uncertainty has been reflected in the market and has naturally led to an increase in recession probabilities.”
Economists at Standard Chartered Bank on Friday estimated that COVID-19 epidemic could affect 30% of China’s imports and 10% of its exports, prompting them to lower their gross domestic product forecast for China this year to 5.5% from 5.8%.
South Korea has reported 48 more cases, bring its total infections from the novel coronavirus to 204, and in Japan, officials from Tokyo and Osaka said they wouldn’t hold large events such as school graduation ceremonies and entrance examinations for three weeks through mid-March, in an effort to contain the viral outbreak, The Wall Street Journal reported .
Meanwhile, the World Health Organization said Friday that there are 76,767 confirmed cases of the illness and 2,247 deaths, marking another day in which the number of new cases world-wide has slowed.