The Dow Jones Industrial Average sank more than 1,000 points on Monday as the spread of the new coronavirus threatened wider damage to the global economy.
The drop was the worst for the index in two years and wiped out its gains so far in 2020. Nervous investors scrambled for safety, loading up on gold, U.S. government bonds and other safe-harbor assets. The price of oil fell sharply on expectations that demand for energy would tumble.
The Dow lost 1,031 points, or 3.6%, to 27,960. The S&P 500 fell 111, or 3.4%, to 3,225. The Nasdaq fell 355, or 3.7%, to 9,221.
More than 79,000 people worldwide have been infected by the new coronavirus. China, where the virus originated, still has the majority of cases and deaths. The rapid spread to other countries is raising anxiety about the threat the outbreak poses to the global economy.
'Meaningful' impact from COVID-19 on global growthSouth Korea is now on its highest alert for infectious diseases after cases there spiked. Italy reported a sharp rise in cases and a dozen towns in the northern, more industrial part of that country are under quarantine. The nation now has the biggest outbreak in Europe, prompting officials to cancel Venice's famed Carnival (NYSE:CCL), along with soccer matches and other public gatherings.
There are also more cases of the virus being reported in the Middle East as it spreads to Iran, Iraq, and Kuwait, among others.
“Stock markets around the world are beginning to price in what bond markets have been telling us for weeks — that global growth is likely to be impacted in a meaningful way due to fears of the coronavirus,'' said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The viral outbreak threatens to crimp global economic growth and hurt profits and revenue for a wide range of businesses. Companies from technology giant Apple (NASDAQ:AAPL) to athletic gear maker Nike (NYSE:NKE) have already warned about a hit to their bottom lines. Airlines and other companies that depend on travelers are facing pain from cancelled plans and shuttered locations.
Crude oil prices slid 3.7%. Aside from air travel, the virus poses an economic threat to global shipping.
But shares in bleach-maker Clorox were up...Technology companies were among the worst hit by the sell-off. Apple, which depends on China for a lot of business, slid 3.4%. Microsoft (NASDAQ:MSFT) dropped 2.6%. Banks were also big losers. JPMorgan Chase (NYSE:JPM) fell 2.1% and Bank of America (NYSE:BAC) slid 4.4%.
Airlines and cruise ship operators also slumped. American Airlines (NASDAQ:AAL) lost 8.2%, Delta Air Lines (NYSE:DAL) dropped 5.8%, Carnival skidded 7.9% and Royal Caribbean Cruises gave up 7.7%.
Gilead Sciences (NASDAQ:GILD) rose 3.9% and was among the few bright spots. The biotechnology company is testing a potential drug to treat the new coronavirus. Bleach-maker Clorox was also a standout, rising 1.7%.
Utilities and real estate companies held up better than most sectors. Investors tend to favor those industries, which carry high dividends and hold up relatively well during periods of turmoil, when they're feeling fearful.
The rotation into defensive sectors has made utilities and real estate the biggest gainers this year, while technology stocks have lost ground.