Coronavirus worries hammer US stocks – again

Well, that did not last long.

After Wednesday’s massive rally, United States stocks staged a dramatic reversal on Thursday, as the coronavirus outbreak led California to declare a state of emergency and airline stocks took a beating following a warning about dwindling passenger numbers.

The Dow Jones Industrial Average fell nearly 700 points or more than 2.5 percent at the opening bell on Wall Street. The broader S&P 500 Index – seen a proxy for the health of US retirement accounts – dropped 2.5 percent, while the technology-laden Nasdaq fell 2 percent.

The S&P 500 had ended 4 percent higher on Wednesday, after investors took heart from Joe Biden’s surprising lead in the Super Tuesday Democratic primaries.

But the distraction from the widening spread of the coronavirus pathogen in the US did not last into Thursday. Coronavirus fears got the best of investors again as the US death toll rose to 11 and California reported the first death outside Washington state, a day after legislators approved a $8.3bn bill to combat the outbreak.

Wall Street’s so-called fear gauge – the CBOE market volatility index – jumped 17 percent in early morning trading.

Recent data have signalled underlying strength in the domestic economy. Official figures on Thursday showed weekly jobless claims fell last week, following a strong reading of the services sector.

All eyes will now be on the crucial non-farm monthly report due on Friday – one of the most highly anticipated snapshots of US economic health.

Shares of US airline Southwest tumbled more than 4 percent after the company issued a revenue warning as the outbreak crushes passenger numbers, while United Airlines and JetBlue Airways cut flights and implemented cost controls.

The International Air Transport Association (AITA) also flagged a potential $113bn hit to global airline revenue, sending shares in American Airlines Group Inc, Delta Air Lines and Spirit Airlines down.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line Holdings are also under pressure as health officials screened people on a cruise line linked to the death in California.

Traders are betting on more monetary easing after the Federal Reserve earlier this week surprised markets with an emergency interest rate cut of half a percentage point.

Yields on the 10-year US treasury – a benchmark for financial products like mortgage rates and student loans – sank below 1 percent again.