- Negative coronavirus headlines prompted a painful reversal in the Dow Jones on Wednesday.
- Fears of a breakout in New York and another confirmed U.S. case hit the stock market hard.
- The wild moves in the Dow overshadowed positive housing market data.
The Dow Jones recoiled after a bright start to the day as news broke that 83 people are being monitored for the coronavirus in New York.
Wednesday had been promising for Dow bulls following the release of robust new home sales data, but the virus headlines landed like a ton of bricks on a nervous stock market.
Dow Jones Plummets After Bright Start
All three of the major U.S. stock market indices fell sharply from their session highs on Wednesday as coronavirus fears gripped the Empire State.
- The Dow declined 102 points or 0.38% to 26,979.36.
- The S&P 500 dipped 0.3% to 3,118.97.
- The Nasdaq clung to gains of 0.21% to trade at 8,984.88.
The Dow had climbed more than 460 points during the morning session.
In the commodity sector, risk appetite appeared mixed.
Crude oil slid more than 2.3%, taking out the critical psychological floor of $50 per barrel to settle at a one-year low.
The price of gold slipped 0.2%, while fellow haven metal silver dipped more than 1.7%. A surging U.S. dollar looks to have been the principal cause of this weakness.
The benchmark 10-year Treasury yield continued to struggle, hitting a new all-time low at 1.3% as investors sought safe harbor in bonds.
Strong U.S. Housing Market Data Fails to Spur a Dow Recovery
Helping to drive an initial bounce in the Dow Jones was some better than expected new home sales data in the United States. The U.S. housing market looks buoyant after demonstrating a clear rebound from disappointing data last month.
Yelena Maleyev, an economist at Grant Thorton, said supply is the only thing preventing this from turning into the “hottest housing boom in decades.”
But she refused to rule out a demand shock from the coronavirus outbreak:
If only there were about one million more homes on the market, we could be experiencing the hottest housing boom in decades.
That said, COVID-19 is an extraordinary event, and events of this type create hesitation, especially when it comes to making a large commitment like purchasing a home. That could undermine gains this spring.
Maleyev is obviously not predicting a housing market crash, but should the Dow continue to struggle, the impact on investments and savings is undoubtedly going to curb demand.
U.S. Stock Market Could Be Extra ‘Vulnerable’ to Coronavirus
Donald Trump’s efforts to calm the stock market’s fears about the coronavirus have so far fallen on deaf ears.
It is looking increasingly likely that an unhappy president is the reason why Tuesday’s blockbuster CDC briefing transcript was curiously not released for almost 24 hours.
The knee-jerk reaction in the Dow Jones to coronavirus headlines shows how nervy sentiment remains on Wall Street.
A potential breakout in Nassau County, New York – which borders Queens – has landed 83 residents in voluntary isolation.
No infections have been confirmed yet, but officials aren’t taking any chances given its proximity to the high-density population of New York City.
A wobbly Dow Jones may be uniquely exposed to the coronavirus. Bulls long touted U.S. equities as a haven for foreign investors against the outbreak. But Bloomberg Opinion analyst Nir Kaissar believes the U.S. stock market is “particularly vulnerable” to the global health crisis.
Kaissar wrote:
What’s not clear is which stock markets would suffer the sharpest declines. That obviously depends on how the crisis unfolds — where the virus spreads, how many people are affected, the impact on regional economies and trading routes, and so forth.
But it also depends on the extent to which markets have already digested the potential risks, and by that criterion, the U.S. stock market appears particularly vulnerable.
The risks will only grow along with the number of confirmed cases within the continental United States.
Dow Stocks: Apple Sturdy, Disney Dives After Iger Exit
It was a weak day in the Dow 30, as a decent 1.7% rally in Apple failed to help the index recover meaningfully.
Disney stock was the worst-performing member of the Dow Jones. DIS plummeted more than 3.2% after CEO Bob Iger departed.
Iger had been hugely successful at the helm of Disney, overseeing the rise of Disney’s historic Marvel film franchise. Investors appear upset he is leaving earlier than his planned exit in 2021.
Helping to limit losses, Boeing was quite firm on the day, managing a 0.45% rally.
3M was over 1.8% higher, possibly due to the excessive demand for its face masks amid the coronavirus outbreak. Unfortunately for investors, it is struggling to scale its supply chain to meet demand.
This article was edited by Josiah Wilmoth.
