U.S. markets and stock ETFs plunged Friday as the negative consequences of a spreading coronavirus on the global economy weighed on investors.
On Friday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 1.5%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) declined 2.0% and SPDR S&P 500 ETF (NYSEArca: SPY) fell 1.8%.
Investors feared that the fast-spreading virus out of Wuhan, China could disrupt the global supply chain and curb travel.
“Everyone is a little bit in the dark,” Lars Kreckel, global equities strategist at Legal & General Investment Management, told the Wall Street Journal. “But the conclusion for most is of a temporary hit to Chinese GDP—and so, a bit of a hit to global GDP—but not something that will derail global growth. A bump in the road.”
The World Health Organization has already declared the coronavirus epidemic a global health emergency after it claimed the lives of over 200 people in China and infected thousands globally, Reuters reports.
“There is more potential for markets to get affected by the coronavirus than SARS in 2003,” Seema Shah, chief strategist at Principal Global Investors, told Reuters. “Asset prices are a lot more over-valued coming into 2020, which means they are already very vulnerable to global sentiment.”
Further adding to the risk-off mood, a gauge of U.S. Midwest manufacturing activity slipped to a four-year low in January, with new orders and production declining and producers projecting weakness for the year ahead.
However, the consumer side seems to remain healthy. The University of Michigan’s headline index of consumer sentiment rose to an eight-month high. Fresh data revealed U.S. consumers continued to spend in December, maintaining a year-long trend. Household spending increased a seasonally adjusted 0.3% in December over November while personal income rose 0.2% last month.
“It’s been a tale of two economies,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told the WSJ.
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