Investors will be watching US stocks today, with all the major indices losing around 3% on Monday.
Context: US stocks closed lower on Monday, after a jump in coronavirus cases outside China. News of the deadly virus spreading to other countries has put other major economies on high alert, adding to the woes caused by the massive disruption to business in China.
Details: After closing lower on Friday, US indices continued their downward momentum with the Dow shedding more than 1,000 points.
The last time that the Dow suffered such a massive loss was in 2018, when inflation worries hit Wall Street investors. The index had tumbled more than 4% twice within a week. The latest downtrend in the Dow has turned the index negative for this year, with a 2% decline year to date. The S&P 500 fell 3.35%, while the Nasdaq 100 lost 3.71%. Shares of Tesla plummeted around 7.5% as the company generates more than 10% of its sales from China and has production plants in the country.
The decline in US markets was followed by Asian and European markets, amid heightening virus-related worries. Most leading companies have warned that they may miss their outlook for the first three months of the year due to the coronavirus impact. The slowdown in demand for goods and services, along with closures of factories in China, is already hurting the global economy.
Till now, US stocks had not responded to the virus outbreak, given the strong earnings season, which had driven US indices to record highs in previous weeks. However, the surge in cases in South Korea and Italy have pressed the panic button. South Korea’s total number of infections surged to 893 on Monday. Italy cancelled public programs after reports of a rise in infections. China reported 71 new deaths and 508 new confirmed cases as of Monday.
Oil prices also dipped on fears of a decline in energy demand, as the global economy slows. The IMF issued a warning of the virus hurting global economic growth by 0.1% in 2020.
Why it matters: US markets are expected to recover slightly today, with stock futures pointing towards a higher open this morning. After the dismal performance of US stocks in the previous sessions, all eyes are on the S&P Case-Shiller home price index, FHFA house price index, CB consumer confidence index and Richmond Fed manufacturing index, scheduled for release later today
What to watch: The market will look at the major indices, with stock futures pointing towards a higher start. Preliminary estimates for the S&P Case-Shiller home price index call for a 2.8% rise in December, following November’s 2.6% gain. The FHFA house price index is expected to gain 0.3% in December, after having risen 0.2% in November.
Other Markets: Most European indices closed lower on Monday, with the UK 100, German 30 and French 40 down 3.34%, 4.01% and 3.94%, respectively.