US Stocks Follow Asian Sell-Off Lower 01/21 09:23
U.S. stocks slipped Tuesday in the first trading day of a holiday-shortened
week, following up on losses around the world as worries deepened about a virus
outbreak in China.
(AP) -- U.S. stocks slipped Tuesday in the first trading day of a
holiday-shortened week, following up on losses around the world as worries
deepened about a virus outbreak in China.
Asian stocks dropped sharply, while European markets and crude oil also
stumbled on concerns that the new coronavirus spreading in the world's
second-largest economy could hurt tourism and ultimately economic growth and
corporate profits. Six people have died, and 291 have been infected in China,
just as people in the country were preparing to make billions of trips for the
Lunar New Year travel season.
Investors are looking at playbooks for past outbreaks, such as SARS in
2002-2003, where airlines, railways and other transportation companies saw
their stocks slide the most, followed by retailers and hospitality companies,
according to strategists at Jefferies.
Within the S&P 500, stocks of U.S. companies that cater to Chinese tourists
had the biggest losses, along with general travel companies, such as casinos
Tuesday's drop for the index follows a strong run, which had sent the S&P
500 to records. Fears of a possible recession have faded, and investors expect
the Federal Reserve to keep interest rates low, and the S&P 500 has risen in 13
of the last 15 weeks.
U.S. companies are in the midst of reporting their earnings results for the
last three months of 2019, and early indications are encouraging. Less than a
tenth of S&P 500 companies have reported their results so far, but of them, 72%
topped analysts' forecasts for profits. Those forecasts were low, to be sure,
with analysts saying S&P 500 profits fell last quarter for the fourth
consecutive time, according to FactSet.
KEEPING SCORE: The S&P 500 was down 0.2%, as of 9:50 a.m. Eastern time.
The Dow Jones Industrial Average slipped 34 points, or 0.1%, to 29,314, and
the Nasdaq composite was down 0.1%.
CHILL IN CHINA: China confirmed many people's fears late Monday when a
government expert said that the new type of coronavirus affecting the country
can transmit from human to human, increasing its potential spread.
The outbreak "is developing into a major potential economic risk to the
Asia-Pacific region," said Rajiv Biswas of IHS Markit in a report.
Biswas pointed to the example of the 2003 outbreak of severe acute
respiratory syndrome, whose economic impact was felt as far away as Canada and
ASIAN SELL-OFF: The Hang Seng index in Hong Kong dropped 2.8%, and stocks in
Shanghai lost 1.4%. Other Asian markets also slumped, including a 1% fall for
South Korea's Kospi and a 0.9% decline for Japan's Nikkei 225.
Japan's central bank raised its forecast for economic growth while affirming
its commitment to stimulus for the economy.
European markets also fell, though the losses were more modest. The FTSE 100
in London dropped 0.8%, France's CAC 40 fell 0.7% and Germany's DAX lost 0.1%.
US IMPACT: Las Vegas Sands fell 6.2%, and Wynn Resorts fell 5.3% for two of
the largest losses in the S&P 500. Both get most of their revenue from Macau on
China's southern coast.
Other travel companies also slumped on worries that customers may stay away.
United Airlines Holdings fell 3.1%, Expedia Group lost 2.4% and Norwegian
Cruise Lines fell 2.4%.
YIELDS: The yield on the 10-year Treasury note slumped to 1.78% from 1.83%
COMMODITIES: Benchmark U.S. crude fell 29 cents to $58.29. Brent crude, the
international standard, dropped 46 cents to $64.74.
Gold lost $11.20 to $1,594.10 per ounce.