US stock indices fell on Friday after data showed that US business activity stalled this month, while a spike in new COVID-19 cases in China and elsewhere sent investors scrambling for safer assets, such as gold and government bonds.
The IHS Markit’s purchasing managers’ index of services sector activity dropped to its lowest level since October 2013, signaling a contraction for the first time since 2016.
The manufacturing sector also clocked its lowest reading since August last year.
Declines on Friday were led by heavyweights Microsoft Corp, Amazon.com Inc and Apple Inc for a second straight day.
The S&P technology index dropped 1.9 percent. Chipmakers, heavily reliant on China for their revenue, also took a beating, with the Philadelphia Semiconductor index falling 2.5 percent.
“We are in an unknown situation and, when valuations are expensive, any minor hint of news that is negative makes investors run for the exits,” said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management Inc in New York.
Hopes of monetary easing by major central banks had propelled the benchmark S&P 500 and the tech-heavy NASDAQ Composite to all-time highs on Wednesday, but the indices posted their first weekly decline in three weeks as the virus appears harder to contain.
The S&P 500 traded 1.4 percent below its all-time high.
“I think Apple’s announcement last week is the beginning of the hard news flow,” said Hugh Anderson, managing director at HighTower Advisors LLC in Las Vegas, Nevada, referring to the iPhone maker’s sales warning due to the outbreak. “Not only are you seeing a break in the supply chain, but also you’re seeing a break in the demand for products, which is a fundamental challenge to an already moderate global growth.”
China reported a jump in new cases on Friday, while South Korea became the latest hot spot with 100 new cases and more than 80 people tested positive for the virus in Japan.
Wall Street’s fear gauge, the CBOE volatility index, hit its highest level in nearly three weeks.
The risk-off sentiment drove up gold and bond prices, while falling US Treasury yields hit shares of lenders, with the S&P banks index down 1.2 percent.
A slide in oil prices knocked 1 percent off the S&P energy index.
The S&P 500 index fell 35.48 points, or 1.1 percent, to 3,337.75. The Dow Jones Industrial Average slid 227.57 points, or 0.8 percent, to 28,992.41. The NASDAQ lost 174.37 points, or 1.8 percent, to 9,576.59.
For the week, the S&P 500 lost 1.3 percent, the Dow fell 1.4 percent and the NASDAQ dropped 1.6 percent.
Coca-Cola Co is the latest big name to warn investors about the potential impact on its finances from the outbreak. China is a big market for the company, and Coca-Cola expects a hit of US$0.02 per share to its first-quarter profit.
Dropbox Inc jumped 21.2 percent on Friday after it raised its outlook for operating margin, and Deere & Co rose 8.2 percent after an unexpected rise in first-quarter profit.
Sprint Corp climbed 6.1 percent as it announced new merger terms with T-Mobile US Inc that would reduce the stake of major Sprint shareholder Softbank Group Corp. T-Mobile shares dipped 0.9 percent.
Declining issues outnumbered advancers for a 1.82-to-1 ratio on the New York Stock Exchange and a 1.94-to-1 ratio on the NASDAQ.
The S&P index recorded 26 new 52-week highs and eight new lows, while the NASDAQ recorded 67 new highs and 49 new lows.
Additional reporting by AP
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