US Market tumbles on coronavirus spread fears

The US equity market finished lower for the third straight session on Monday, 24 February 2020, joining a global rout, on escalating worries that the spread of the COVID-19 illness beyond China will disrupt the global economic growth. At closing bell, the Dow Jones Industrial Average shed 1,031.60 points, or 3.6%, to 27,960.80. The S&P 500 lost 35.48 points, or 1.05%, to 3,337.75. The Nasdaq Composite Index slumped 111.86 points, or 3.4%, to 3,225.89, and the Nasdaq Composite was off by 355.31 points, or 3.7%, to 9,221.28.

The stock market opened lower and worsened as the spread of the coronavirus inside and outside of China has been unsettling the global market. Chinese officials reported fewer than 1,000 new cases as on Sunday, though the overall total in mainland China is nearly 77,000 infected, with more than 2,400 deaths. Also, the reports stated sharp increases in the number of cases in South Korea, Italy and Iran. Italy, which Moody's says will fall into recession this quarter because of the virus, has the largest known outbreak outside of Asia, with more than 200 confirmed cases and six deaths as of Monday. The caseload in South Korea, a critical link in the technology industry's pan-Asian supply chain, climbed to 833 and a lawmaker in Iran said the death toll from the city of Qom is 50.

 

Goldman Sachs on Monday cut its estimate for U.S. economic growth in the first quarter to just 1.2% from an original 1.4%, which would make it one the weakest three-month periods in Trump's presidency.

On Saturday, the International Monetary Fund warned the virus outbreak could reduce global economic growth by 0.1% this year, and drag China's annual growth 0.4%age points lower than January estimates.

Economists at Standard Chartered Bank estimated on last Friday that COVID-19 epidemic could affect 30% of China's imports and 10% of its exports, prompting them to lower their gross domestic product forecast for China this year to 5.5% from 5.8%.

Factories around the world are grappling with parts shortages as their Chinese suppliers struggle to resume normal operations. With global economic engines sputtering, the Federal Reserve and other central banks facing face calls for emergency help.

But central bank chiefs may be ill equipped to battle the economic consequences of the flulike illness, which has prevented many Chinese workers from returning to their assembly lines and kept consumers shut at home instead of shopping. Interest rates are in negative territory in Europe and at near-historic lows in the United States. And while making credit less expensive the Fed's standard tool for combating a slump may offset some of the financial upheaval, it can do little to remedy broken supply chains or ease individuals' fears of contagion.

Crude-oil prices fell 5%, with West Texas Intermediate crude for April delivery settling 4.9% lower at $50.87 a barrel, while April Brent crude, the global benchmark, lost 5.5% to finish at $55.27 a barrel.

Gold prices surged by $27.80 an ounce, or 1.7%, to settle at $1,676.60, its highest finish in seven years.

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