U.S. stocks slumped Thursday after making fresh highs in the overnight session.
Most of the drop occurred in a sudden, rapid move midday, all within about 90 minutes, but there is still roughly a few hours left in the session.
Traders lacked a logical catalyst for the decline other than possible technical factors such as market reaching new highs, and an increased risk-off sentiment brought on by renewed fears of the coronavirus slowing the global economy.
The Dow Jones Industrial Average fell over 290 points, or about 1%. The 30-stock average went from trading off about 200 points to a session low of down 388 points in roughly two minutes before recovering a bit of the loss. Meanwhile the S&P 500 slid 1.2% and the Nasdaq Composite plummeted 1.6%. Markets had just reached new highs in the overnight session after the three benchmarks closed near highs on Wednesday.
Major stock index ETFs echoed the fall in equities, with the SPDR S&P 500 ETF Trust (SPY) falling roughly 1% before recovering a bit, while the SPDR Dow Jones Industrial Average ETF (DIA) fell 1% as well. The Invesco QQQ Trust (QQQ) which had been holding up the best is down the most with a 1.5% loss today, after a precipitous fall from fresh highs.
Some traders pointed speculated that a report from the Chinese state-run Global Times, mentioning a steep increase in coronavirus cases could be at work, although the timing of the story did not sync up with Thursday’s move lower.
China racked up a total of 394 new infections and 136 deaths through the end of Wednesday, which is its lowest in weeks, after national authorities changed the criteria for classifying cases. There is a net total of 74,546 infections and 2,118 deaths, most in central Hubei province. The dramatic differences in numbers have raised concerns over calculation methods.
“The coronavirus reminds us just how small the world is,” said Ed Yardeni, president and chief investment strategist at Yardeni Research. “Even as the infection has been largely contained to China, the business ramifications have rippled across the world.”
Analysts are also worried that stocks are becoming overbought once again, giving investors any reason to take some profits.
“This market is just moving on momentum and, at this point, it’s priced close to perfection,” said Christian Fromhertz, CEO of The Tribeca Trade Group. “At this point, if we start seeing anything negative, it will probably force some people to start taking profits.”
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