U.S. stocks tumbles on Monday, as their worst day in over three months aimed coronavirus epidemic threat.
The move by China to extend the Lunar New Year holiday due to a virus outbreak, are also fueling the worries about the economic impact of containment efforts in the world’s second largest economy.
Benchmark S&P 500 suffered its worst weekly performance on Monday, January 27, 2020, since September last week as China locked down several cities and curbed travel, reminding the investors of the deadly “SARS virus” that killed nearly 800 people in 2002-03 and cost the global economy billions.
Most of the investors viewed any long-term economic impact as unlikely in light of the past experiences with viral outbreaks.
A senior vice president Stephen Massocca at Wedbush Securities in San Francisco, said, “This whole thing is way overblown,”
He said, “It seems to me that the Chinese are doing a much better job of containing it, than with SARS and what did SARS ultimately lead to? Did that visrus lead to some sort of economic catastrophe – no.”
If we look at the aftershocks of a 2003 SARS (Severe Acute Respiratory Syndrome) outbreak, fortunately, the S&P rallied more than 10% from start of the outbreak to the announcement of its containment.
Look at the GRAPHIC-The S&P 500 rallied as SARS spread here:
More specifically, the travel-related stocks, which includes the airlines, casinos and hotels, were among the hardest hit on Wall Street. Meanwhile, the shares of sectors exposed to China’s growth, which includes the technology .SPLRCT, materials .SPLRCM and energy .SPNY, pressured the markets.
The corporate earnings are now expected to show a decline of 0.5% for the fourth quarter, according to Refinitiv data. Among the 87 companies, that have already reported on Monday morning, 67.8 have topped the expectations, below the 74% rate from the past four quarters.
Technology stocks and internet heavyweights that have also powered the recent rally including the Apple Inc (AAPL), Alphabet Inc (GOOGL), Microsoft Corp (MSFT), and Amazon.com Inc (AMZN), which account for about 15% of the S&P 500 weighting, shed at least 1.6%.
Melco Resorts & Entertainment Ltd (MLCO), Wynn Resorts Ltd (WYNN) and Las Vegas Sands Corp (LVS) that have large operations in China, tumbled at least 5%. The NYSE Arca Airline index dropped 3.32%.
Yum China Holdings Inc (YUMC) plummeted 5.27% after the company said it had temporarily closed some of its KFC and Pizza Hut stores in Wuhan, the epicenter of the outbreak.