U.S. stocks on Thursday tumbled into correction territory intraday, amid elevated worries over the rapid, global spread of the COVID-19 virus.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, -2.42% traded about 608 points, 2.3%, lower early afternoon, near 26,349. The S&P 500 SPX, -2.31% shed 67 points or 2.1% to trade near 3,050. The Nasdaq Composite COMP, -2.56% slumped 214 points, 2.4%, to trade near 8,767.
All three benchmarks fell into correction territory, defined as a decline of at least 10%, but no more than 20%, from a recent peak. However, some market experts say a fall into correction isn’t consummated until after an asset closes at those levels.
What’s driving the market?
The latest slide began Wednesday night, after a news conference by President Donald Trump failed to reassure investors and as more new cases of the disease were reported outside China than inside for the first time.
Trump on Wednesday evening said Americans were at very low risk from the outbreak and said the nation was well prepared. He also announced that Vice President Mike Pence would be in charge of the country’s outbreak response.
“What we’re seeing today is a reaction to the government response last night,” said Dave Nadig, chief investment officer at ETF Flows. “The market is saying, we’re on our own.”
But today’s trades are not “the new normal,” Nadig told MarketWatch. “We’re in a short-term moment,” and one that may even be healthy: “The idea that we were going to continue to make all time highs amid these uncertainties made me nervous. I would argue that the 10%-ish decline we’re seeing now doesn’t feel inappropriate, given that we’re looking at half a year of significant economic slowdown.”
A new coronavirus case was confirmed in Northern California, the first in the U.S. by someone who hasn’t traveled to infected areas or been in known contact with anyone who has, raising the worrisome prospect that the virus is spreading by other means.
“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.
Also late Wednesday, Microsoft Corp. MSFT, -4.47% warned it won’t meet its quarterly forecasts due to the effects of the outbreak, likely signaling more widespread guidance misses across the tech industry. Microsoft shares were down 2.4% in premarket trade.
See: Consumer-facing companies will be the first hit if the coronavirus spreads across the U.S.
U.S. economic data showed that 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.
An updated estimate of U.S. fourth-quarter gross domestic product matched economist expectations and showed no change from the first estimate of 2.1% annualized growth.
And a report on U.S. durable goods orders was weaker than expected, declining 0.2% in January. December’s initial reading was raised, however, and “core capital goods,” a proxy for business investment, rose 1.1% for the month, well above the 0.3% consensus forecast.
Pending home sales, or contracts signed, rebounded in January, the National Association of Realtors reported. The monthly increase of 5.2% was the second-highest in over two years, the trade group said.
Which companies are in focus?
- Shares of Best Buy Co. Inc. BBY, -2.44% fell 1% despite reporting fourth-quarter profit and revenue that topped Wall Street expectations.
- Perrigo Co. PLC PRGO, -15.44% shares tumbled 12% midmorning after the provider of over-the-counter health and wellness products reported fourth-quarter adjusted profit that was shy of expectations, sales that were in line, and a downbeat full-year earnings forecast.
- Teladoc Health Inc. TDOC, +16.33% shares roared 22% higher after a pair of hefty price target increases.
- Shares of J.C. Penney Co. Inc. JCP, -3.96% jumped in premarket trading Thursday but then fell nearly 9% after the retailer reported earnings and revenue that topped analyst expectations and offered guidance that wasn’t as bearish as Wall Street forecasts.
- Booking Holdings Inc., BKNG, +1.16% the company formerly known as Priceline, saw shares tumble, then recover to trade slightly higher after the company said late Wednesday that coronavirus would hit its Q1 profit. Wall Street analysts on Thursday cut their stock price target for the online travel aggregator.
- Tesla Inc. TSLA, -10.61% shares took another leg lower, losing more than 9% Thursday and bringing the weekly loss for the car maker over 20%.
- Shares of Whiting Petroleum Corp. WLL, -21.24% lost about one-third of their value after the company provided guidance that disappointed analysts.
- Apache Corporation APA, +6.53% shares were more than 7% higher after the company reported higher-than-expected earnings.
- Square Inc. SQ, +7.36% shares were 6.5% higher after strong earnings.
What are other markets doing?
Most Asian markets fell Thursday, with Japan’s Nikkei NIK, -2.13% down 2.1%, while Hong Kong’s Hang Seng HSI, +0.31% rose 0.3% and South Korea’s Kospi 180721, -1.05% slipped 1.1%.
European markets were mixed. The Stoxx Europe 600 SXXP, -3.75% lost 4.5%, but the FTSE 100 FTSE, -2.94% ticked up 0.4%.
The U.S. dollar index DXY, -0.53% slipped 0.3% against a basket of currency trading partners.
Haven assets found some support as investors looked for safety. Gold for April delivery GCJ20, +0.23% ticked up 0.3% to about $1,648, while the 10-year U.S. Treasury TMUBMUSD10Y, -3.06% rate fell 2 bps to 1.29%, recovering from another all-time low earlier in the morning.
After falling for a fourth consecutive session Wednesday, oil continued to drop, with West Texas Intermediate crude for April delivery CLJ20, -3.71% tumbling nearly 4% and Brent crude, the global benchmark, BRNJ20, -2.77% down nearly 3%.
The Cboe Volatility Index VIX, +22.24% was on pace for its second-sharpest weekly surge on record, having nearly doubled so far. That would make it second only to that of the week ending Aug. 21, 2015, after China devalued its currency unexpectedly.
Related: Coronavirus worries are rocking global markets. What are ETF investors doing?
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