The sell-off in stocks accelerated as bonds surged on concern the spread of the coronavirus will slam global economic growth.
The Dow Jones Industrial Average erased its 2020 advance as traders remained on edge over the impact of the deadly disease that’s now infected about 10,000 people around the world. Caterpillar Inc. sank as its profit outlook trailed analysts’ estimates, adding to worries about global business spending. Amazon.com Inc. soared after a blowout quarter, delivering an unprecedented boost to its market value that now exceeds $1 trillion.
Treasury 30-year yields breached 2% for the first time since October. Oil slumped.
Investors in China will get their first chance to trade since Jan. 23 on Monday, when financial markets reopen. For equities, the declines are likely to be exacerbated by the amount of leverage in the market. That could create a downward spiral where steep losses become steeper as traders face margin calls. As an example of how extreme selling can be, the Shanghai equity benchmark fell almost 6% in May, when it resumed trading following a holiday break on negative trade-war news. As worries about the virus escalated, the offshore yuan took a beating and tumbled past the key level of 7.
The final week of January has been tumultuous across global markets, as a barrage of corporate earnings, central-bank decisions and economic data landed in the growing shadow of the deadly epidemic. The outbreak will cut U.S. economic growth by 0.4 percentage point in the first quarter as the number of tourists from China plunges and exports to the Asian nation slow, according to Goldman Sachs Group Inc. Still, a report showed that American consumer sentiment increased in January to an eight-month high, indicating sustained optimism in the face of the coronavirus.
Global stocks headed toward their worst week and month since August, with the S&P 500 trimming its January advance to less than 0.5%. Alongside tech, defensive companies such as utilities and real estate have driven gains in the U.S. benchmark. Energy and material shares have underperformed.
“The virus outbreak represents this unknown that, frankly, markets aren’t very good at handicapping,” said David Lafferty, chief market strategist at Natixis Investment Managers in Boston. “It’s almost like an open-ended risk.”
Some other corporate highlights:
• Exxon Mobil Corp. and Chevron Corp. posted the weakest results in years amid disappointing numbers in almost all business lines.
• Honeywell International Inc. sales forecast disappointed analysts as an industrial slowdown crimped revenue growth.