Dow plunges 3.2% as coronavirus worries lead to second straight rout

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Traders work on the floor of the New York Stock Exchange shortly before the closing bell. PHOTO: REUTERS
Traders work on the floor of the New York Stock Exchange, on Feb 24, 2020. PHOTO: NYTIMES

NEW YORK (AFP) - Wall Street stocks suffered a second straight rout on Tuesday (Feb 25), with losses picking up after US health officials warned the coronavirus was likely to hit the world's biggest economy.

The Dow Jones Industrial Average plunged 3.2 per cent, or about 880 points, to 27,081.36.

The broad-based S&P 500 sank 3 per cent to 3,128.21, while the tech-rich Nasdaq Composite Index lost 2.8 per cent to 8,965.61.

After starting the session higher, major US indices quickly reversed course and tumbled further after American health authorities urged local governments, businesses, and schools to develop contingency plans for an expected larger outbreak in the US.

"Ultimately, we expect we will see community spread in this country," said Nancy Messonnier, a senior official with the Centres for Disease Control and Prevention (CDC).

"It's not so much a question of if this will happen any more, but rather more a question of exactly when this will happen, and how many people in this country will have severe illness."

US stocks had been stable and throughout most of February, lingering near record highs, even as Chinese cases of coronavirus have soared and the virus has spread to more countries.

But investors have been unnerved the last couple of days following larger outbreaks in Italy and South Korea, among other places outside of China.

"Bit by bit, US investors are seeing the prospects for global growth diminish," said Gregori Volokhine of Meeschaert Financial Services.

"With the news of the last three or four days, it's hard to be optimistic."

In spite of the CDC statements, White House economic counsellor Larry Kudlow said US economic data remained solid and that the ailment remained "very tightly contained in the United States," he said on CNBC.

"It's mostly centred in China," Kudlow said, citing data showing the US economy on track for 2.1 per cent growth in the first quarter and citing recent reassuring economic reports.

Data released on Tuesday showed US consumer confidence rose slightly in February, although the report lagged analyst expectations.

While equity losses were widespread, petroleum-linked companies were especially big losers, with Devon Energy and Occidental Petroleum dropping more than 7 per cent.

Large banks including Bank of America and JPMorgan Chase dropped more than four percent as Treasury bond yields continued to fall, a dynamic that typically hits bank profits.

Travel-oriented stocks also sank, including Marriott International, down 8 per cent, and American Airlines, down 9.2 per cent.

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