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U.S. stocks tumbled Friday, with the Dow and S&P 500 index recording their biggest one day falls since August, as fears that Chinese coronavirus epidemic would slow economic growth rattled Wall Street.
A busy week of mixed U.S. corporate earnings reports preoccupied investors, with shares of bellwether Caterpillar slumping while shares of Amazon.com soared after delivering strong quarterly results.
What did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.24% shed 603.41 points, or 2.1%, to settle at 28,256.03. The S&P 500 /zigman2/quotes/210599714/realtime SPX +2.28% lost 58.14 points, or 1.8%, ending at 3,225.52. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +1.72% retreated 148 points, or 1.6%, closing at 9,150.94.
After all three benchmark indexes saw record highs earlier this month, for the year to date the Dow is now down 0.99% and the S&P 500 is down 0.16%, while the technology heavy Nasdaq index is still up 1.99%.
What drove the market?
The Dow and S&P 500 index erased their gains for 2020 to date after President Donald Trump late Friday declared a U.S. public health emergency in response to the coronavirus outbreak in China, ordering up to a 14-day quarantine for citizens returning from China’s Hubei province and denying entry to some foreigners.
The latest figures from China’s National Health Commission say that at least 213 people have died and about 9,700 have been sickened. The number of people sickened by the new coronavirus in China now exceeds the global total infected with severe acute respiratory syndrome, or SARS, which killed nearly 800 people after emerging from southern China in late 2002 and spreading into 2003, but so far the death toll from the current epidemic is lower.
Delta /zigman2/quotes/200327741/lastsale DAL -4.99% and American Airlines /zigman2/quotes/209207041/lastsale AAL -5.89% halted flights to China after the U.S. government warned travelers to avoid the nation even though the World Health Organization refrained from recommending curbs on travel or trade when declaring a global health emergency on Thursday.
“It’s certainly the virus concerns. What we are seeing is an unknown, and whenever there is an unknown, the market is vulnerable to pullbacks, especially when you have a full valuation market,” Joe Saluzzi, co-head of equity trading at Themis Trading, told MarketWatch.
Saluzzi says equity investors also could be “taking cues from the bond market.” Low long-dated Treasury yields paint a dour forecast for global economic growth, and suggest a potential spillover into the U.S. economy, which so far has managed to shrug off international headwinds.
The epidemic will likely cut U.S. economic growth by 0.4 percentage points in the first quarter as the number of tourists from China plunges and exports to the Asian nation slow, according to Goldman Sachs Group Inc.
The 10-year Treasury note yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.54% slipped to 1.521%, its lowest since Oct. 4. The drop in the benchmark note’s yield below the 3-month Treasury bill rate /zigman2/quotes/211347046/realtime BX:TMUBMUSD03M +1.65% , inverting the so-called yield curve, has fed worries that the U.S. is exposed to a global growth shock.