The Dow finished more than 1,000 points lower Monday, marking its third-worst daily point drop in history, as the spread of the COVID-19 illness beyond China raised worries that the hit to overseas economic growth could be more persistent than investors expected, hampering the prospects for a global recovery in 2020.
Where did major indexes end?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57% shed 1,031.60 points, or 3.6%, to settle at 27,960.80, after plunging more than 1,079.97 points to a session low of 27,912.44. Monday’s decline turned the blue-chip gauge negative for 2020, leaving it with a 2% year-to-date decline. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.30% slumped 111.86 points, or 3.4%, to close at 3,225.89, and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.09% off by 355.31 points, or 3.7%, to finish at 9,221.28. The S&P 500 is now down 0.2% year-to-date, while the Nasdaq is still up 2.8% in 2020
What drove the market?
“We are being derailed for one specific reason,” said Tony Roth, chief investment officer of Wilmington Trust, pointing to the use of quarantine and isolation to contain the spread of COVID-19 infections. “That’s going to have economic fallout,” he told MarketWatch, while predicting U.S. stocks could potentially “see a 10% to 20% correction in the next four weeks.”
Authorities in northern Italy canceled some public events, including Venice’s Carnival, in an effort to reduce the spread of the coronavirus. Italian officials said Sunday they have 152 confirmed cases, the most in any country outside Asia. Neighboring Austria temporarily halted all rail traffic to and from Italy for several hours Sunday, following a scare about two possibly infected passengers on board. The FTSE MIB Italy index /zigman2/quotes/210598024/delayed IT:I945 -1.52% slumped over 5% Monday.
“Markets were betting that the coronavirus was going to be contained in China, and that we would see some V-shaped recovery. But as headlines on the virus spread have come out, there’s uncertainty how far this will go,” said Keith Lerner, chief market strategist for SunTrust Advisory Services, in an interview.
Asian equity markets also sold off after the number of cases in South Korea shot up over the weekend. South Korea reported 70 more cases and a lawmaker in Iran said the death toll from the city of Qom is 50.
On Saturday, the International Monetary Fund warned the virus outbreak could reduce global economic growth by 0.1% this year, and drag China’s annual growth 0.4 percentage points lower than January estimates.
The World Health Organization also declined to call the coronavirus a pandemic. Instead, the international health body said they saw it as epidemics in different parts of the world.
China’s President Xi Jinping on Sunday noted the outbreak news was “grim,” but said measures must be taken to get China’s economy going again, including reopening factories in low-risk areas. Experts forecast as much as a 1% reduction in China’s economic output this quarter due to strict quarantines that closed businesses and factories.