U.S. stocks pulled back from records on Tuesday after news of the first case of coronavirus in the U.S. spooked investors who have been enjoying a brisk, record-setting run-up for the major benchmark indexes in recent weeks.
U.S. markets were closed Monday in observance of Martin King Luther Jr. Day.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, -0.44% shed 188 points, or 0.6%, to 29,160, on track to break its five-day winning streak. The S&P 500 index SPX, -0.17% fell 10 points, or around 0.3%, at 3,320 and the Nasdaq Composite index COMP, -0.10% was down 28 points, or 0.3%, to trade at 9,361, but briefly turned positive mid-session to set a record intraday high of 9,397.58.
Last week, the Dow, S&P 500 and Nasdaq Composite Index COMP, -0.10% all posted their best weekly gains since Aug. 30, according to FactSet data.
DJIA, -0.44% The Dow has risen for five of the past six weeks, with a year-to-date return of 2.6%. The S&P 500 has gained for two consecutive weeks, with a year-to-date return of 2.9% and the Nasdaq has risen for six straight weeks, with a year-to-date return of 4.6%.
What’s driving the market?
The risk-off mood in Asian equities spilled over onto Wall Street after the U.S. Centers for Disease Control and Prevention announced the first case of the coronavirus within the U.S. The virus’s outbreak in China, which originated in the city of Wuhan, has sickened around 300 people, leaving six dead, according to Chinese state media and health officials.
The World Health Organization was said to be considering declaring an international public health emergency over the virus, as it did with swine flu and Ebola.
“The spreading of the virus in China was part of a number of issues contributing to futures trading lower, but the intraday downturn we see now is more related to reports that [the coronavirus] could be a domestic issue. When you have a market close to all-time highs, it’s vulnerable to any bad news,” said Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research.
At the same time, he said such shocks tend to prove short-lived, especially, in a bull market that has seen records across major equity benchmarks in week after week.
Also quelling some of last week’s record-setting enthusiasm to start this week were fresh concerns about sluggish economic growth outside of the U.S., the start of a presidential Senate impeachment trial of President Donald Trump, and worries that a respiratory virus in China, which has infected hundreds of people, could harm an already-weak expansion in Asia.
Softness in markets Tuesday is being driven “by a combination of fears related to the virus and investor fatigue,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company. “It provides an opportunity for some people to take some profits.”
On Monday, the International Monetary Fund, or IMF, downgraded its global economic growth forecast from 3.4% to 3.3% for 2020, with the organization projecting that the U.S. economy to grow by 2.0% this year, a cut of 0.1 percentage points compared with the IMF’s October 2019 forecast.
Meanwhile, President Donald Trump’s impeachment trial began in earnest on Tuesday, with Sen. Majority Leader Mitch McConnell submitting a proposalthat could result in a speedy trial and Trump possibly being acquitted of wrongdoing.
Markets have largely dismissed impeachment talk because investors see a low likelihood that Trump will be removed from office following a Senate trial.
For his part, Trump touted the U.S. economy’s strength in a speech in Davos, Switzerland, kicking off an important gathering of business leaders at the World’s Economic Forum. “I’m proud to declare that the U.S. is in the midst of an economic boom the likes of which the world has never seen,” Trump said. “America’s economic turnaround has been nothing short of spectacular.”
He said trade talks with Brussels were going well even as he suggested import duties on European cars were still on the table if an agreement was not struck. He also confirmed France would delay until the end of 2020 a controversial tax on digital services that would impact U.S. tech giants after the Trump administration threatened retaliatory tariffs.
On Friday, U.S. stocks finished at records after December housing starts data that showed home construction rising 16.9%, to annual rate of 1.608 million units, to the fastest pace since 2006.
Which stocks are in focus?
Shares of Boeing Co. BA, -3.62%, the biggest contributor to the Dow Jones Industrial Average, fell 5.5% Tuesday after news that the embattled aerospace company is in talks to “secure a loan of $10 billion or more,” according to a report by CNBC. The company faces rising costs related to the aftermath of two fatal crashes of its 737 Max airplanes.
How are other markets trading?
Crude-oil prices fell, with the cost of a barrel of West Texas Intermediate crude CLG20, -0.50% for February delivery slipping 29 cents, or 0.5%, to $58.25 a barrel on the New York Mercantile Exchange. In precious metals, the price of an ounce of gold for February delivery GCG20, -0.21% on Comex fell $2.40, or nearly 0.2%, to settle at $1,557.90 an ounce.
Asian stocks tumbled overnight amid the virus-outbreak fears, as the China CSI 300 000300, -1.71% tumbled 1.7%, Japan’s Nikkei 225 NIK, -0.91% declined 0.9% and Hong Kong’s Hang Seng Index HSI, -2.81% fell 2.8%.