Stocks slide on Wall Street, extending steep drops this week
Major U.S. stock indexes gave up early gains and closed mostly lower Wednesday, extending the market’s heavy losses for the week.
The benchmark S&P 500 fell for the fifth straight day after swinging between a 0.6% loss and 1.7% gain. Smaller company stocks bore the brunt of the selling. The bond market continued to flash warning signs as long-term Treasury yields fell further below short-term yields.
Worry about economic fallout from the virus outbreak that originated in China has fueled a sharp sell-off this week that’s wiped out the market’s gains for the year.
The virus continues to spread and threatens to hurt industrial production, consumer spending, and travel. More cases are being reported in Europe and the Middle East. Health officials in the U.S. have been warning Americans to prepare for the virus.
“The market is still digesting the full impact of what the coronavirus could mean for global GDP growth and, more importantly, on earnings growth for a lot of companies,” said Nadia Lovell, U.S. equity strategist at J.P. Morgan Private Bank.
The S&P 500 index fell 0.4%. It’s on
track for its biggest monthly decline since May. The Dow Jones
Industrial Average dropped 123.77 points, for a three-day loss of 2,034
points. A modest rally in technology stocks helped nudge the Nasdaq
composite to a 0.2% gain.
Smaller company stocks fell the most. The Russell 2000 index lost 1.2%.
European markets were mostly higher and Asian markets fell.
A
burst of morning buying had stocks on track for modest gains, but the
rally mostly faded by the end of the day, reflecting ongoing concerns
among investors about the new coronavirus.
The outbreak has now
infected more than 81,000 people globally and continues spreading.
Brazil has confirmed the first case in Latin America. Germany, France
and Spain were among the European nations with growing caseloads. New
cases are also being reported in several Middle Eastern nations.
U.S.
cases currently total 57, and the White House has requested $2.5
billion for vaccine development, treatment and protective equipment. On
Tuesday, U.S. health officials called on Americans to be prepared for
the disease to spread in the United States.
Bond yields headed
lower for much of the day, but then recovered mostly. The yield on the
10-year Treasury inched up to 1.34% from 1.33% late Tuesday. The yield
on the 3-month Treasury bill edged up to 1.51%. The inversion in the
yield between the 10-year and the 3-month Treasurys is a red flag for
investors because it has preceded the last seven recessions.
“The
bond market is sending us some warning signals that we should pay
attention to and that’s what you see playing out in the market today,”
Lovell said.
Investors have been moving more money into bonds in
the wake of the outbreak. Traders are concerned the global economy could
slow down as the world’s second-largest economy struggles to contain
the outbreak.
“A slowdown definitely is on the horizon, but it’s
transitory,” Lovell said. “I would expect economic growth to
reaccelerate in the back half of the year as China starts to come
online.”
Energy companies led the selling Wednesday as the price of U.S. crude oil fell 2.3%.
Cruise
operators continued falling amid persistent virus fears. Norwegian
Cruise Line Holdings fell 7.9%, Royal Caribbean Cruises dropped 8.1% and
Carnival slid 7.5%.
Other companies that depend on travelers also declined. Expedia lost 7.1%.
Technology
stocks eked out a modest gain. The tech sector was among the worst hit
by sell-offs this week as many of the companies rely on global sales and
supply chains that could be stifled by the spreading outbreak.
Microsoft rose 1.2% and Adobe rose 1%.
TJX, the parent of retailer
TJ Maxx, surged 7.2% after beating Wall Street’s fourth-quarter profit
forecasts and raising its dividend.
Disney fell 3.8% a day after
Bob Iger’s surprise announcement that he will immediately step down as
CEO of the giant entertainment company. Iger steered the company’s
absorption of big moneymakers, including Star Wars, Pixar, Marvel and
Fox’s entertainment businesses. He also oversaw the launch of the Disney
Plus streaming video service.
Toll Brothers slid 14.6% after the
homebuilder reported disappointing fiscal first-quarter profit. The poor
results weighed on nearly all homebuilder stocks. D.R. Horton fell
2.6%.
A government report Wednesday showed that sales of new homes jumped 7.9% in January to the fastest pace in more than 12 years.
MARKET ROUNDUP
The S&P 500 index fell 11.82 points, or 0.4%, to 3,116.39. The Dow dropped 123.77 points, or 0.5%, to 26,957.59.
The
Nasdaq gained 15.16 points, or 0.2%, to 8,980.77. The Russell 200 index
of smaller company stocks dropped 19.14 points, or 1.2%, to 1,552.76.
Benchmark
crude oil fell $1.17 to settle at $48.73 a barrel. Brent crude oil, the
international standard, dropped $1.52 to close at $53.43 a barrel.
Wholesale gasoline fell 8 cents to $1.45 per gallon. Heating oil
declined 7 cents to $1.50 per gallon. Natural gas fell 3 cents to $1.82
per 1,000 cubic feet.
Gold fell $6.90 to $1,640.00 per ounce, silver fell 36 cents to $17.83 per ounce and copper fell 1 cent to $2.58 per pound.
The dollar rose to 110.22 Japanese yen from 110.12 yen on Tuesday. The euro strengthened to $1.0897 from $1.0881.
AP Business Writer Damian J. Troise contributed.