“The virus spreading to Italy and Iran is finally spooking some investors on what has mostly been a mostly Asian situation,” said Rick Bensignor, the founder of Bensignor Group and a former strategist for Morgan Stanley. “It’s not a question of if it comes to the U.S., but when, and perhaps investors are finally realizing that.”
The S&P 500 fell 1.1% on Friday after a major piece of U.S. economic data showed a sizable hit from the epidemic. U.S. business activity fell in February for the first time since 2013 as the outbreak made firms hesitant to place orders.
“This escalation has had investors reverse their previous opinion that it would be a temporary economic problem,” said Michael McCarthy, chief market strategist at CMC Markets.
Nomura Securities International Inc. cross-asset macro strategist Charlie McElligott had cautioned in a note Friday that e-minis below about 3,325 was “where things could begin to get slippery.” That’s the level at which he said gamma would flip to the downside for options dealers, so they might add to pressure on the index.
--With assistance from Abhishek Vishnoi, Joanna Ossinger and Filipe Pacheco.
This article was provided by Bloomberg News.