U.S. stocks tumbled to close lower for a sixth straight day Thursday, taking benchmark indexes into correction territory and to the lowest levels since October, as the global coronavirus epidemic disrupted international trade and travel.
How did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.24% lost 1,190.90 points, or 4.4%, to close below 26,000 at 25,766.60, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.28% shed 137.63 points, or 4.4%, to end at 2,978.76. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.72% slumped 414.29 points, or 4.6%, finishing at 8,566.48.
All three benchmarks closed in correction territory, defined as a decline of at least 10%, but no more than 20%, from a recent peak. For the S&P 500 and Nasdaq, it marked the worst daily percentage drop since Aug. 18, 2011, but the steepest since Feb. 5, 2018 for the Dow.
The Dow is now down 9.71% for the year, while the S&P 500 is off 7.80% year-to-date, and the Nasdaq has lost 4.53%.
What drove the market?
Investor sentiment took another hit Thursday when California’s governor said 8,400 people were being monitored after travelling to China. The outbreak has the potential to become a pandemic and is at a decisive stage, the head of the World Health Organization said Thursday.
The latest slide began Wednesday night, after a news conference by President Donald Trump failed to reassure investors and more new cases of the disease were reported outside China than inside for the first time.
“The number of confirmed cases of coronavirus is on the rise, and so is the number of countries that have infections. Dealers are dreading a pandemic as they are afraid economic activity will be reduced as lockdowns will disrupt the business world,” said David Madden, market analyst at CMC Markets UK, in a note.
The global economy is on course for its weakest year since the 2008 financial crisis as efforts to contain epidemic has hit manufacturing activity in China and disrupted international trade and travel, Bank of America predicted. Earlier, Goldman Sachs cut its outlook for U.S. companies’ profit growth to zero.
“And frankly at this stage after the coronavirus slow down in travel plans that has busted the global supply chain apart, it will be a miracle if we avoid a recession,” MUFG chief economist, Chris Rupkey said. “If companies can’t get the parts, then they can’t produce the goods that make the economy hum.”
In U.S. economic data reported Thursday, the number of Americans applying for unemployment benefits for the first time rose more than expected in the Feb. 22 week. Jobless claims are still close to longtime lows, however.