Monday January 27th

27-01-2020

Dow futures sink more than 400 points as coronavirus cases rise

U.S. stock index futures fell sharply Monday morning after more cases of the coronavirus were confirmed over the weekend, ratcheting up worries over the virus’ impact on the world economy. Around 7 a.m. ET, Dow Jones Industrial Average futures were down 426 points, indicating a loss of 438 points at the open. S&P 500 and Nasdaq 100 futures pointed to losses of more than 1% to start off the session. There are 2,862 confirmed cases so far in China and the death toll in China has risen to 81. The World Health Organization’s director general is traveling to China to meet with government and health officials. In the U.S., a fifth case of coronavirus was confirmed over the weekend. “China is the biggest driver of global growth so this couldn’t have started in a worse place,” said Alec Young, managing director of global markets research at FTSE Russell. “Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy.” Airline stocks American and Delta both dropped around 3% in the premarket. United slid 3.2% before the bell. Gaming stocks such as Las Vegas Sands and Wynn Resorts dropped 7.2% and 5.8%, respectively. MGM Resorts slid more than 3%. Travel stocks Expedia, Carnival and Marriott International all pulled back at least more than 2%. Consumer shares with exposure to China such as Apple, Disney, Nike and Estee Lauder all dropped more than 1.9%. Caterpillar, a bellwether for global growth, fell 2.3% while the VanEck Vectors Semiconductor ETF (SMH) dropped 2.5%. Applied Materials, Advanced Micro Devices and Nvidia each traded more than 3% lower. Overseas, global stocks took a hit, as the Japanese Nikkei 225 dropped 2% while the German Dax lost 2.3%. France’s CAC 40 also pulled back more than 2%. The Stoxx 600 index — which tracks a broad swath of European equities — tanked 2%. The iShares MSCI Emerging Markets ETF (EEM) dropped 3.9%. Chinese markets were closed due to the Lunar New Year holiday. Traditional safe havens such as Treasurys and gold got a lift as worries over the sickness permeated. The 10-year U.S. Treasury yield fell to 1.63% while gold futures climbed 0.6% to $1,581.60 per ounce. The Cboe Volatility Index (VIX), widely considered to be the best fear gauge on Wall Street — jumped to around 18 from about 14.5. Coronavirus fears have been rattling investors since last week. Stocks closed lower on Friday, marking their first weekly decline of the young year. Shares of Dow component Boeing were also weighing on the market on reports of a plane crash in Afghanistan. It was initially reported to be a plane from the state-owned Ariana Afghan Airlines. However, Reuters has since said that the airline’s acting CEO Mirwais Mirzakwal has denied that one of its planes has crashed. Boeing shares fell more than 1.5% in the premarket. On the data front, new home sales numbers are expected at 10 a.m. ET and the Dallas Fed manufacturing numbers are due at 10:30 a.m. ET.