U.S. markets and stock ETFs pared early-morning gains on Wednesday as traders continued to assess the potential economic fallout from a widespread coronavirus contagion.
On Wednesday, the Invesco QQQ Trust (NASDAQ: QQQ) gained 0.52%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) fell 0.35% and SPDR S&P 500 ETF (NYSEArca: SPY) dropped 0.3%. DIA was also testing its long-term support at the 200-day simple moving average.
“This is a time of peak uncertainty for coronavirus,” Edward Park, deputy chief investment officer at Brooks Macdonald, told the Wall Street Journal. “We don’t yet know the size of how much it’s spread or the mortality rate. That’s what markets are reacting to, peak uncertainty, rather than facts.”
The markets tried to stabilize Wednesday after the Dow Jones Industrial Average suffered through a 1,900 point free fall in the previous two sessions, its largest two-day decline on record. Investors grew increasingly concerned over the spreading coronavirus outbreak that is popping up in various countries around the world and the potential disruption it will cause on corporate earnings and global growth.
Coronavirus cases and deaths continued to increase outside of China, especially in Italy, Iran, Japan and South Korea.
“The market is pricing in a significant slowdown in global growth and corporate earnings,” Ong Zi Yang, senior macro analyst at FSMOne.com, told the WSJ. “It is hard to quantify the economic impact now but there will definitely be a slowdown.”
Investors turned risk-off and the selling pressure intensified after the U.S. Food and Drug Administration officials warned of the possibility the coronavirus outbreak could turn into a pandemic.
“The selloff isn’t driven by fundamentals, it is driven by fear,” John Ham, associate advisor at New England Investment and Retirement Group, told Reuters. “At the end of the day, it is a buying opportunity for investors with a long-term focus.”
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