By Alex
Eule | Tuesday, January 21
Contagion. It turns out
there is something that can stop the 2020 stock market: worries about
an epidemic. A respiratory virus known as coronavirus has been blamed
for six deaths in China. It has begun to spread through a large swath
of Asia, and, on Tuesday afternoon, the U.S. Centers for Disease
Control said the first case had been identified in the U.S., in
Washington state. (The U.S. had already begun screening travelers
from Wuhan, China, at airports in San Francisco, New York, and Los Angeles.)
Investors quickly went to
worst-case scenarios. The 2003 pneumonia outbreak known as Severe
Acute Respiratory Syndrome, or SARS, stemmed from a similar coronavirus.
That virus caused significant travel disruptions through Asia. Barron's Leslie
Norton covered the outbreak at the time, noting big
declines for Asian markets, along with empty coffee shops
and airplanes as panic spread.
SARS ultimately spread to 29
countries, infecting 8,096 people and causing 774 deaths, according to the CDC. But public health
officials were able to contain the spread of the disease. Only eight people in
the U.S. got SARS, and none of them died.
Nonetheless, on Tuesday, the
new coronavirus was already having a financial impact in the
U.S. Wynn Resorts, Las
Vegas Sands, and MGM
Resorts --
gaming companies that all have significant exposure to Asia -- along with Royal
Caribbean Cruises, American Airlines, and United
Airlines were among the
worst-performing stocks in the S&P 500. They each
fell at least 4% on the day.
The Dow
Jones Industrial Average lost 152 points for its first
decline in six sessions.
Here's how Alec
Young, managing director of global markets research
at FTSE Russell, assessed the
situation:
From an investment
standpoint, the risk with any virus is in the scope of its economic impact, and
the mere fact that this has spread from China overnight to the U.S. so quickly
reinforces the idea that the negative fallout could be global rather than
local. Of course, it’s very early and we want to be careful not to overreact
until more facts emerge but, given the global economy’s sluggishness in recent
months and overall reliance on the U.S. and China to drive growth, it’s no
surprise this issue has investors on edge. Another factor at play is the fact
that the U.S. markets had a tremendous run-up, leaving it more vulnerable to
profit-taking than usual.”
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