Wall Street on Friday fell sharply as fears spread through the markets that a virus outbreak emanating from China will dent global growth.
The Dow Jones Industrial Average skidded more than 600 points and the S&P 500 erased its gains for last month.
Technology companies, which do a lot of business with China, led the losses. Airlines fell after Delta Air Lines Inc and American Airlines Inc suspended flights to and from China.
Just two weeks ago, the S&P 500 had closed at an all-time high, having climbed about 13 percent since early October last year.
A preliminary trade deal signed by the US and China early last month eased a big source of uncertainty in the markets. Volatility was running at 12-month lows and even a dustup between the US and Iran did not rock markets.
Then came the virus outbreak in China. The US stock market, which had been calmly setting record after record, suffered its worst January since 2016 and its first monthly loss since August last year.
China’s stock markets reopen tomorrow after being closed since Jan. 23 for the Lunar New Year holiday. A significant amount of pent-up selling has likely built up in the meantime.
Some funds that try to mimic the movements of Chinese indices are still trading in the US and elsewhere. These exchange-traded funds (ETFs) are moving on investors’ expectations for where Chinese stocks would be if markets in China were still open.
For example, the Xtrackers Harvest CSI 300 China A-Shares ETF tracks an index of large stocks that trade in Shanghai and Shenzhen, China. It was down roughly 9 percent since Jan. 23.
The WHO has declared the outbreak a global emergency, a designation that signals that the virus is now a significant risk to other countries and requires a global response.
“It seems like the equity market is now coming around to the realization that maybe this is something that may linger for some time,” Wells Fargo Investment Institute senior global market strategist Sameer Samana said.
American Airlines fell 3.2 percent and Delta slipped 2.4 percent.
Apple Inc, which relies on Chinese consumers for sales and factories for supplies, fell 3.9 percent, while Nvidia Corp slid 3.8 percent and other chipmakers slipped.
Amazon.com Inc was a rare bright spot in the market on Friday. The online retailer surged 7.4 percent after blowing past Wall Street’s fourth-quarter profit forecasts.
The company said that Amazon Prime membership exploded 50 percent since it last disclosed that figure in 2018.
The S&P 500 on Friday sank 58.14 points, or 1.8 percent, to 3,225.52, a fall of 2.1 percent from 3,295.47 on Jan. 24.
The Dow Jones Industrial Average on Friday fell 603.41 points, or 2.1 percent, to 28,256.03, plunging 2.5 percent from a close of 28,989.73 a week earlier.
The NASDAQ Composite on Friday dropped 148 points, or 1.6 percent, to 9,150.94, a decrease of 1.8 percent from 9,314.91 on Jan. 24.
The Russell 2000 index of smaller company stocks on Friday dropped 34.16 points, or 2.1 percent, to 1,614.06, plummeting 2.9 percent from a close of 1,662.23 a week earlier.
Economists have been scrambling to calculate the virus’ effects on China’s economy, which is far bigger and more closely integrated with the rest of the world than it was during the SARS outbreak 17 years ago. China now accounts for 16 percent of global economic output, up from 4 percent in 2003.
Oxford Economics Ltd director of global macro research Ben May estimated that the virus would shave 0.4 percentage points off Chinese economic growth this year, leaving it at 5.6 percent, the slowest since 1990, and reduce global growth by 0.2 percentage points to 2.3 percent, the weakest since the financial crisis.
Others expect a repeat of the SARS experience: a quarter or two of weaker Chinese growth followed by a quick and full recovery with limited fallout worldwide.
“History suggests that unless the end of the world is going to be caused by this flu-like virus, it will prove to be only a slight headwind for the global economy,” High Frequency Economics chief economist Carl Weinberg wrote in a research report.
Additional reporting by staff writer
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