Live

Watch CBSN Live

Dow plunges another 1,200 points on coronavirus fears

New California coronavirus case raises alarm

Stocks continued to crater on Thursday, with the Dow tumbling more than 1,000 points for the second time this week as jittery investors try to assess the potential economic toll amid signs the coronavirus is spreading in the U.S. and other countries.

The latest rout put the blue-chip stock index into "correction" territory, meaning a drop of at least 10% from its most recent high on February 19. That sharp decline over the last six days of trading amounts to the fastest 10% drop in the history of the S&P 500, according to Deutsche Bank Securities, with the selloff lopping $3.4 trillion off the value of U.S. equities. Indeed, the broader S&P 500-stock index is headed for its worst week since October 2008, when the financial crisis pummeled markets following the housing crash, according to the Associated Press.

The Dow dropped nearly 1,200 points, or 4.4%, to close at 25,767, while the S&P 500 and tech-heavy Nasdaq composite also fell more than 4%. Yields on U.S. Treasuries tumbled, with the benchmark 10-year note falling to an all-time low as investors sought refuge from stocks.

"Equity markets have recovered from a brief stability yesterday and are continuing to sell off this morning, driven apparently by fears of a coronavirus pandemic and by worries that policies to contain the virus will slaughter global economic activity," Carl Weinberg of High Frequency Economics told investors in a note.

The U.S. Centers for Disease Control and Prevention on Wednesday announced the first possible case of community spread of the coronavirus in the United States: A California patient who reportedly did not have relevant travel history or exposure to another diagnosed patient before getting diagnosed. Reports that New York health officials have asked more than 700 people in the state to isolate themselves because of possible coronavirus exposure also spooked investors, according to Morgan Stanley.

Globally, more than 81,000 people have come down with COVID-19, as the disease caused by the virus is officially known, with the death toll topping 2,800.

Businesses are changing plans and reporting disruptions as the outbreak widens:

  • Microsoft on Wednesday became the second major tech company after Apple to warn the coronavirus will dent its financial results.
  • Facebook on Thursday cancelled the "in-person component" of its annual F8 developer conference, the company's biggest annual event of the year that typically brings thousands of software engineers to Silicon Valley. 
  • Food conglomerate Nestle has told employees to suspend business travel.
  • Airlines are preparing for more big hits, with some Asian airlines asking employees to take three weeks of unpaid leave.

While President Donald Trump on Wednesday appealed for calm and insisted the country is "very, very ready" to tackle the deadly disease even if it starts to spread more widely inside the U.S., investors are weighing the growing impact on businesses and economic activity. 

"The coronavirus has been a body blow to the Chinese economy, which now threatens to take out the entire global economy," wrote Moody's Analytics' Mark Zandi in a research note. "A global recession is likely if COVID-19 becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea."

Hospitals preparing for coronavirus outbreak in U.S.

The World Health Organization for now is declining to label the disease a pandemic and continues to say there's time to rein in the outbreak. Yet measures to contain the disease could also impact the U.S. economy, such as if even more businesses cancel conferences and employees' travel plans. Some of the world's biggest employers, such as Nestle, are advising their workers to suspend business trips, Bloomberg News reports.

Despite the turbulence on Wall Street, some analysts still expect the coronavirus to be be contained in fairly short order, which would limit the economic damage and set the stage for a rebound in the second quarter.

"While every case is different, history shows that once a disaster hits and markets sell off, investors may make reasonable projections about the initial growth slump, but tend to be bad at pricing in how quickly growth can recover," said Mark Haefele, global chief investment officer at UBS.

Many investors also expect the Federal Reserve to cut interest rates if markets keep slumping in a bid to shore up growth.

View CBS News In
CBS News App Open
Chrome Safari Continue