Stocks plunge as coronavirus pandemic fears rock markets

Markets are reeling again on Thursday, after the U.S. reported its first coronavirus case involving a person who didn’t travel to an infected country, and didn’t knowingly interact with someone who did. Experts are becoming increasingly resigned to a worldwide spread of the disease, even as China’s new infections slow.

11:02 a.m. ET: IMF warns on virus’ impact to global growth

Via Reuters, the fast-spreading coronavirus will clearly have an impact on global economic growth and the International Monetary Fund is likely to downgrade its growth forecast as result, a spokesperson said.

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10:40 a.m. ET: Selling intensifies, all major benchmarks deep in the red

An ugly day is getting uglier:

  • S&P 500 (^GSPC): 3,024.97, down 91.42 -2.93%

  • Dow (^DJI):  26,210.16, off 747.43 or -2.77%

  • Nasdaq (^IXIC): 8,682.66, off 298.11 or -3.32%

  • Crude oil (CL=F): 46.34, off $2.39 or -4.90%

  • Gold (GC=F): $1,656.50, up $13.40 or 0.82%

  • 10-year Treasury (^TNX): 1.2610, down 0.0490 or -3.74%

And the mood on Wall Street is grim: Goldman Sachs now expects no earnings growth this year at all:

We have updated our earnings model to incorporate the likelihood that the virus becomes widespread. Our revised baseline EPS estimates are $165 in 2020 (previously $174) and $175 in 2021 (previously $183), representing 0% and 6% growth. Our reduced forecasts reflect the severe decline in Chinese economic activity in 1Q, lower end-demand for US exporters, supply chain disruption, a slowdown in US economic activity, and elevated uncertainty. Consensus forecasts imply EPS will climb 7% in 2020 and 11% in 2021.

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10:10 a.m. ET: Tesla, Apple fall hard as China/virus fears bite

SHANGHAI, Jan. 7, 2020 — Tesla CEO Elon Musk speaks at a delivery ceremony for Tesla China-made Model 3 in Shanghai, east China, Jan. 7, 2020. U.S. electric carmaker Tesla officially delivered the first batch of 10 made-in-China Model 3 sedans to the public Tuesday afternoon, one year after the company broke ground on its first overseas plant. The company also announced the launch of a project to manufacture Model Y vehicles in its Shanghai gigafactory.(Photo by Ding Ting/Xinhua via Getty) (Xinhua/Ding Ting via Getty Images)

The darling of the electric vehicle market (TSLA) is getting the business end of investor coronavirus fears — as Apple (AAPL), the world’s most prominent consumer brand.

Tesla’s stock is tumbling by over 8% and Apple is down by nearly 6%, in what’s shaping up to be another ugly day on Wall Street. It underscores the risks associated with a multinational that is heavily reliant on China for manufacturing and demand: Both companies have major production facilities in the Middle Kingdom, and for Apple, China is a big market for iPhones.

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9:55 a.m. ET: Door Dash to test the IPO waters

Close-up of logo for food delivery service Doordash, August 30, 2019. (Photo by Smith Collection/Gado/Getty Images)

Softbank-backed food delivery app DoorDash has confidentially filed paperwork to go public, making it the latest startup to try and test the market. Two things to consider:

  1. DoorDash is entering a very crowded food delivery space (UberEats, Postmates, Caviar, Seamless/GrubHub, et al) that’s getting more cutthroat by the day;

  2. With coronavirus fears not likely to abate soon, it’s a less than ideal time for any company to float an offering.

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9:45 a.m. ET: US outbreak would ‘almost inevitably cause a recession’

A man wearing a mask visits a beach as snow-capped Mount Fuji is visible in the distance in Fujisawa, Japan, Thursday, Feb. 27, 2020. According to local businesses in the area, the number of visitors has dropped significantly since the outbreak of COVID-19. (AP Photo/Jae C. Hong)

The global supply chain is arguably the biggest wild card in estimating whether the coronavirus will trigger a global downturn.

With that in mind, Paul Ashworth, Capital Economics’s top US economist, has a ray of sunshine take. The firm thinks there’s a “modest” 10% chance of a recession over the next 12 months with domestic data so healthy, but then there’s this:

Nevertheless, it is important to stress that the latest available economic activity data mostly only cover January, so they do not reflect the full impact of any supply chain-related disruption stemming from the outbreak in China. Furthermore, there is no way our models can incorporate the risk of a widespread coronavirus outbreak in the US which, just like it appears to have done in China, would almost inevitably cause a recession.

9:30 a.m. ET: Stocks plunge at the opening bell

Wall Street’s five-day selling wave continues unabated, as the coronavirus crisis takes on a life of its own amid soaring infection rates outside of China. Investors are selling virtually everything in sight, driving major benchmarks down around 2%.

Here’s where the markets stood when trading began:

  • S&P 500 (^GSPC): 3,051.23, down 65.16 or -2.09%

  • Dow (^DJI):  26,445.40, down 512.19 or -1.90%

  • Nasdaq (^IXIC): 8,732.37, down 248.40 or -2.77%

  • Crude oil (CL=F): -4.70%, or $2.29 to 46.44

  • Gold (GC=F): $1,654.70, up $11.60 or +0.71%

  • 10-year Treasury (^TNX): 1.264 down -0.046 or -3.52%

7:55 a.m. ET: ‘The battle has been lost’: Here’s why China, HK rallied

After weeks of relative complacency, investors are now aggressively pricing in the possibility of a worldwide spread of the coronavirus. Ah, some might ask, but why did China and Hong Kong markets rise (Tokyo, South Korea and Taiwan all shed at least 1% in offshore trading)?

In a note to clients, Bannockburn Global Forex’s Marc Chandler hits the nail on the head:

A new phase of the Covid-19 is at hand. Yesterday was the first time that the number of new cases in the world surpassed the number of new cases China acknowledged. This confirms what we have known, namely that the battle for containing it in China has been lost.

Peter Boockvar at Bleakley Advisory Group was of the same mind:

While the S&P 500 is approaching its 200 day moving average of 3045 and the Euro STOXX 600 is basically sitting on its, interestingly the China H share index and the Hang Seng index both closed higher overnight. Maybe reflecting the belief that the rest of the world has to deal with this virus while the worst has passed in the region it first came from. Both are still down 5% year to date and lower on the week but I just wanted to point that out. 

The coronavirus has been forcing multinational companies to assess the potential negative impact on their businesses. Wednesday evening, tech giant Microsoft (MSFT) warned that it would likely miss its revenue forecast for its personal computing business due to the illness, pushing its shares 3% lower in pre-market trading Thursday.

7:25 a.m. ET: Stock futures sink; Dow futures fall 250 points

U.S. stocks futures were pointing to a lower open Thursday, following European stocks lower after the U.S. reported its first case of “community spread” coronavirus.

Here were the main pre-market moves, as of 7:25 a.m. ET:

  • S&P 500 futures (ES=F): 3,082, down 28.25 points or 0.91%

  • Dow futures (YM=F): 26,659, down 255 points or 0.95%

  • Nasdaq futures (NQ=F): 8,770.25, down 80 points or 0.90%

  • Crude oil (CL=F): $47.55 per barrel, down $1.18 or 2.42%

  • Gold (GC=F): $1,651 per ounce, up $7.90 or 0.48%

The Centers for Disease Control and Prevention (CDC) confirmed the first U.S. case of coronavirus from unknown origin in Northern California. The agency said that it is unclear how the patient contracted the virus, because there is no travel history or exposure to an infected individual.

The new case in the U.S. comes after President Donald Trump held a news conference Wednesday evening addressing the coronavirus. Trump noted that the risk to the U.S. was “very low” and announced that Vice President Mike Pence would lead the U.S. response to the outbreak. The president also mentioned the stock market and said that markets should comeback from their recent rout.

There are over 82,500 cases of coronavirus worldwide and more than 2,800 deaths, as of Thursday morning. At least 47 countries are affected by the virus globally, and while South Korea is still the most heavily affected outside of China, other countries are beginning to take serious measures. Japanese Prime Minister Shinzo Abe ordered that all school remain closed through March.

Traders work during the closing bell at the New York Stock Exchange (NYSE) on February 24, 2020 at Wall Street in New York City. (Photo by Johannes EISELE / AFP) (Photo by JOHANNES EISELE/AFP via Getty Images)

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