Lingering Coronavirus Worries Lead To Sharp Pullback On Wall Street

Extending the volatility seen over the past several sessions, stocks moved sharply lower during trading on Thursday following the rally seen on Wednesday. The major averages more than offset yesterday’s gains but remain well off last Friday’s lows.

The major averages all posted steep losses on the day. The Dow plunged 969.58 points or 3.6 percent to 26,121.28, the Nasdaq tumbled 279.49 points or 3.1 percent to 8,738.60 and the S&P 500 plummeted 106.18 points or 3.4 percent to 3,023.94.

Lingering concerns about the economic impact of the coronavirus outbreak contributed to the sell-off on Wall Street, as some traders look to cash in on yesterday’s strong gains.

Investors continue to monitor developments regarding the coronavirus outbreak that has now spread worldwide, as confirmed cases reach more than 95,000 globally.

Coronavirus infections in South Korea have jumped to more than 6,000, with the Korea Centers for Disease and Control and Prevention revealing that three more people died from the virus, bringing the total to 35.

Switzerland has also reported its first death from the virus, while the number of cases in Germany rose by 87 to 349. California declared a state of emergency after a coronavirus-related death in the state, where there are at least 53 confirmed cases.

In U.S. economic news, the Labor Department released a report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended February 29th.

The report said initial jobless claims edged down to 216,000, a decrease of 3,000 from the previous week’s unrevised level of 219,000. Economists had expected jobless claims to slip to 215,000.

Meanwhile, revised data released by the Labor Department showed U.S. labor productivity increased by less than initially estimated in the fourth quarter of 2019.

The report said labor productivity climbed by 1.2 percent in the fourth quarter compared to the previously reported 1.4 percent jump. Economists had expected the pace of productivity growth to be unrevised from the initial estimate.

The Labor Department also said unit labor costs rose by 0.9 percent in the fourth quarter, reflecting a notable downward revision from the originally reported 1.4 percent spike. The increase in labor costs was also expected to be unrevised.

A separate report from the Commerce Department showed new orders for U.S. manufactured goods pulled back by much more than expected in the month of January.

The Commerce Department said factory orders slid by 0.5 percent in January after surging up by 1.9 percent in December. Economists had expected factory orders to edge down by 0.1 percent.

Sector News

Banking stocks showed a substantial move to the downside on the day, moving sharply lower amid a continued drop in treasury yields. The KBW Bank Index plunged by 5.8 percent to its lowest closing level in over a year.

Significant weakness was also visible among oil service stocks, as reflected by the 5.5 percent nosedive by the Philadelphia Oil Service Index. The sell-off by oil service stocks came amid a notable decrease by the price of crude oil.

Transportation stocks also saw considerable weakness on the day, with the Dow Jones Transportation Average also hitting its lowest closing level in over a year with a 5.3 percent slump.

Steel, brokerage, chemical, and housing stocks also showed notable moves to the downside, while gold stocks were among the few groups to buck the downtrend amid a sharp increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.1 percent, while China’s Shanghai Composite Index surged up by 2 percent.

Meanwhile, the major European markets showed significant moves to the downside on the day. While the French CAC 40 Index tumbled by 1.9 percent, the U.K.’s FTSE 100 Index and the German DAX Index slumped by 1.6 percent and 1.5 percent, respectively.

In the bond market, treasuries extended a recent uptrend trend, pushing the yield on the benchmark ten-year note further below 1 percent. The yield on the ten-year note, which moves opposite of its price, fell by 6.6 basis points to 0.926 percent.

Looking Ahead

On Friday, the Labor Department is scheduled to release report on the employment situation in the month of February.

Employment is expected to increase by about 175,000 jobs in February after jumping by 225,000 jobs in January, while the unemployment rate is expected to hold at 3.6 percent.

The monthly jobs report is typically closely watched by investors but could be overshadowed by the latest developments regarding the coronavirus.

Traders are also likely to keep an eye on the comments by several Federal Reserve officials at a Shadow Open Market Committee event for clues about the possibility of further interest rate cuts.

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