U.S. markets and stock ETFs remain depressed, extending losses and briefly touching correction territory, as investors brace for a potential coronavirus pandemic.
On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) declined 2.8%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) fell 2.5% and SPDR S&P 500 ETF (NYSEArca: SPY) dropped 2.4%. DIA broke below its 200-day simple moving average while SPY was testing its long-term support.
Meanwhile, both the Nasdaq Composite and the Dow Jones Industrial Average traded close to 10% below their February highs, putting them within shot of a correction in just a week after setting record highs. The S&P 500 was also retreating at its quickest pace to a correction from an all-time high than any other period in the past 40 years.
“Obviously it’s a bloodbath,” David Bahnsen, chief investment officer of The Bahnsen Group, a wealth-management firm, told the Wall Street Journal. “When you get into a free-fall mode, there’s really little that can be done but wait for some sort of footing to be found.”
The sell-off has intensified on growing concerns that the coronavirus outbreak could turn into a pandemic and drag on the global economy as the novel virus pops up in new locations around the world.
“The global fear factor has become stronger due to the warnings coming out from the U.S.,” Song Seng Wun of CIMB Private Banking in Singapore, told the WSJ. “And as recession risks grow, the markets have become more jittery.”
Some U.S. companies have already warned that they could lose as much as half their annual revenue from China if the coronavirus epidemic extends through the summer. Goldman Sachs Group’s equity analysts cautioned that American businesses will generate no earnings growth in 2020 if the virus spreads.
“We have to brace ourselves for wave after wave of earnings downgrades,” Paul O’Connor, head of multiasset at Janus Henderson Investors, told the WSJ. “The globalization of the virus extinguishes confidence in the V-shaped recovery that was the view last week.”
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