Stock indices opened down roughly 3% on Monday from where they finished last week, losing more than 3% of their value within minutes of the opening bell. The losses were generally expected, with Dow futures down more than 800 points earlier in the day following reports that the coronavirus outbreak had deteriorated considerably in China and was starting to more rapidly spread a variety of other areas like Italy, Iran, South Korea and beyond.
“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,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in a statement on Monday, noting that “it is still our belief that this threat to global growth is real and should not be ignored.”
As of Monday morning, more than 79,000 infections had been confirmed worldwide, with over 2,600 deaths counted. The virus to date has been mainly focused within mainland China, and multinational businesses in the international manufacturing, retail and tourism industries have been concerned about its spread for quite sometime, as quarantine restrictions have a direct impact on factory slowdowns and travel in China, having the potential to decimate first-quarter earnings reports.
“Major global companies, especially those with heavy exposure to the Chinese economy, are lowering profit guidances due to the outbreak. This will have a knock-on effect across international supply chains and throughout economies,” Nigel Green, chief executive and founder of the deVere Group, wrote in a research note Monday. “In addition, coronavirus has struck at a time when major economies, including Japan, Germany, India and Hong Kong are facing a downturn due to other factors such as the U.S.-China trade dispute and political protestors, which could hit the world economy.”
Now that the virus has disseminated to other countries, what was once held to be a local issue in China has spawned extreme panic, tanking stocks and sending investors scrambling into perceived safe havens like gold.
The S&P 500 is down over 5% from its all-time high in just 3 days, with stocks continuing to plummet as of noon EST.
Stock ETFs are tracking the losses as well, with the SPDR S&P 500 ETF Trust (SPY) falling more than 3%, the SPDR Dow Jones Industrial Average ETF (DIA) off 3.23%. The Invesco QQQ Trust (QQQ) which had been holding up the best until recently, has lost almost 4% in trading Monday as all markets continue to plummet.
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