Stocks fell on Wall Street in afternoon trading Tuesday amid global jitters about a virus outbreak in China.
The slide came on the first trading day of a holiday-shortened week and followed losses in global markets amid deepening concerns that the new coronavirus spreading in the world’s second-largest economy could hurt tourism and ultimately economic growth and corporate profits.
Six people have died, and 291 have been infected in China, just as people in the country were preparing to make billions of trips for the Lunar New Year travel season. A U.S. citizen who recently returned from China was diagnosed with the new virus in the Seattle area, making the United States the fifth country to report a case, following China, Thailand, Japan and South Korea.
“From an investment standpoint, the risk with any virus is in the scope of its economic impact, and the mere fact that this has spread from China overnight to the U.S. so quickly reinforces the idea that the negative fallout could be global rather than local,” said Alec Young, managing director of Global Markets Research for FTSE Russell.
Asian stocks closed sharply lower. European markets also fell. Within the S&P 500, stocks of U.S. companies that cater to Chinese tourists had some of the biggest losses, along with general travel companies, such as casinos and airlines.
Industrial, financial and energy companies were among the decliners. Those losses outweighed gains in defensive sector stocks, including real estate, utilities and household goods makers. Traders also shifted money into U.S. government bonds, sending yields lower.
Investors are looking at playbooks for past outbreaks, such as SARS in 2002-2003, where airlines, railways and other transportation companies saw their stocks slide the most, followed by retailers and hospitality companies, according to strategists at Jefferies.
Headlines about the spreading coronavirus have given investors an excuse to take profits following the market's recent record-setting run. The three major U.S. stock indexes were coming off all-time highs set Friday. The S&P 500 hasn't had a single-day drop of more than 1% since October.
“Investors have shown a lot of optimism, and that might make some a little bit skittish," said Willie Delwiche, investment strategist at Baird. ”Valuations are elevated. In this sort of environment, I don't think it takes much of a headline to trigger a reaction."
Tuesday’s drop for the index follows a strong run. Fears of a possible recession have faded, and investors expect the Federal Reserve to keep interest rates low, and the S&P 500 has risen in 13 of the last 15 weeks.
U.S. companies are in the midst of reporting their earnings results for the last three months of 2019, and early indications are encouraging. Less than a tenth of S&P 500 companies have reported their results so far, but of them, 72% topped analysts’ forecasts for profits. Those forecasts were low, to be sure, with analysts saying S&P 500 profits fell last quarter for the fourth consecutive time, according to FactSet.
KEEPING SCORE: The S&P 500 was down 0.2%, as of 3:34 p.m. Eastern time. It had been down as much as 0.4% earlier in the day.
The Dow Jones Industrial Average dropped 139 points, or 0.5%, to 29,208, and the Nasdaq composite slid 0.1%. The Russell 2000 index of smaller company stocks fell 0.6%.
Stock markets in Europe closed broadly lower. Indexes in Asia also fell.
CHILL IN CHINA: China confirmed many people’s fears late Monday when a government expert said that the new type of coronavirus affecting the country can transmit from human to human, increasing its potential spread.
The outbreak “is developing into a major potential economic risk to the Asia-Pacific region,” said Rajiv Biswas of IHS Markit in a report.
Biswas pointed to the example of the 2003 outbreak of severe acute respiratory syndrome, whose economic impact was felt as far away as Canada and Australia.
US IMPACT: Las Vegas Sands fell 5.3%, and Wynn Resorts tumbled 6.4% for two of the largest losses in the S&P 500. Both casino companies get most of their revenue from Macau on China’s southern coast.
Other travel companies also slumped on worries that customers may stay away due to virus fears. Royal Caribbean Cruises fell 4.2%, United Airlines lost 4.1%, and Booking Holdings dropped 3%.
STILL GROUNDED: Boeing shares slid 3.5% after the aircraft manufacturer said that it doesn't expect federal regulators to approve changes to the grounded 737 Max until this summer — several months longer than the company was saying just a few weeks ago.
EARNINGS PARADE: Halliburton joined the growing list of companies to report stronger results than analysts expected. The oilfield services provider reported a loss for the quarter and a decline in revenue, but the numbers nevertheless topped Wall Street's forecasts. Still, a slide in oil prices weighed on the stock, which lost an early gain and fell 0.1%.
YIELDS: The yield on the 10-year Treasury note slumped to 1.77% from 1.83% late Friday. That helped lift shares in homebuilders broadly higher, as a decline in the 10-year Treasury yield tends to pull mortgage rates lower. Lennar climbed 2.5%.
DRUMMING UP DIVIDENDS: When bonds are paying less in interest, dividend-paying stocks begin to look more attractive to income investors. That helped real-estate investment trusts and utility stocks to rise in particular. American Tower rose 1.5%, while Edison International gained 1.4%.
LOSING PRESSURE: A sharp drop in the price of natural gas weighed on energy sector stocks. Cabot Oil & Gas, which gets most of its revenue from gas, led the slide, losing 6.8%. It was also the biggest decliner in the S&P 500.
COMMODITIES: Benchmark U.S. crude fell 20 cents to settle at $58.34 a barrel. Brent crude, the international standard, dropped 61 cents to close at $64.59.
Natural gas slumped 11 cents, or 5.4%, to settle at $1.90 per 1,000 cubic feet.
Gold dropped $2.40 to $1,557.90 per ounce.
AP Business Writer Joe McDonald contributed.