U.S. stocks finished mostly lower Wednesday, with the Dow and S&P 500 index falling for a fifth straight day, as investors digested reports on the spread of China’s coronavirus to Europe and the Americas.
Dozens of American and European companies have now warned of the epidemic’s impact on their supply lines and earnings, including Microsoft /zigman2/quotes/207732364/composite MSFT +2.20% which lowered its earnings guidance after the market closed Wednesday.
How did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.68% fell 123.77 points, or 0.5%, to settle at 26,957.50, marking the worst five-day point drop for the blue-chip index on record. The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.78% shed 11.82 points, or 0.4%, to finish at 3,116.39, while the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.44% added 15.16 points, or 0.2%, to close at 8,980.77, snapping a four-day losing streak and handing it an 0.1% gain for 2020. The Dow and S&P 500 were negative year-to-date.
The Dow and S&P 500 index have now seen their largest five day percentage decline since February 8th, 2018.
On Tuesday, the Dow dropped 879.44 points, or 3.2%, to 27,081.36, while the S&P 500 shed 97.68 points, or 3%, to close at 3,128.21. The Nasdaq Composite dropped 225.67 points, or 2.8%, to finish at 8,965.61. Tuesday’s decline was the fourth straight for all three major indexes.
What drove the market?
Equities fell as the rapid spread of COVID-19 infections and deaths outside of China continued to hang over markets, despite stocks starting out the day with a short-lived recovery.
“The last couple of days have seen like an emotional reaction, as opposed to a fact-based reaction,” Oliver Pursche, chief market strategist with Bruderman Asset Management, told MarketWatch. “The reality is that the data is coming in so quickly and changing so quickly,” he said about the spread of the illness beyond Asia. “It’s really difficult to see that changing over then next three or four weeks.”
While investors pointed to encouraging signs that central banks and policymakers may be more willing to deploy economic stimulus to cushion the blow from the virus, the number of confirmed cases and deaths outside China has continued to rise, particularly in Italy, Iran, Japan and South Korea. Stocks had fallen Tuesday after the U.S. Centers for Disease Control and Prevention said Americans should prepare for the spread of the coronavirus in the U.S.
“We’ll see a second drop in the equity markets once the number of infected in these countries with single-digit infections start bumping up after the incubation period of 14 days,” Dec Mullarkey, a managing director of investment strategy at SLC Management, wrote in an note Wednesday afternoon.
“Economists’ forecasts that Coronavirus will only impact Q1 seem incredibly optimistic at the moment – essentially, no one knows yet how bad it will get, and we are waiting for further indications.”
If COVID-19, the coronavirus that has sickened more than 80,000 people, spreads across the U.S. as health officials are warning, consumer-facing companies would be the first to be hit as people isolate themselves and avoid public spaces, analysts said Wednesday.
“Investors have largely been caught off-guard by the serious and far-reaching economic consequence of the coronavirus,” said Nigel Green, founder and chief executive of the deVere Group, a financial services and advisory company. While some multinationals have lowered earnings guidance, “many more are likely to do so in coming weeks. Clearly, this will hit global supply chains, economies across the world and ultimately government coffers too,” said Green.