A worker cleans up an electronic stock board of a securities firm in Tokyo, Tuesday, Jan. 21, 2020. Asian stock markets have tumbled as concern about the impact of a Chinese disease outbreak on tourism and regional economies grows. (AP Photo/Koji Sasahara)

US stocks stall out following Asian sell-off on virus fears

January 21, 2020 - 2:07 pm

Stocks fell on Wall Street in afternoon trading Tuesday amid global jitters about a virus outbreak in China.

The slide came on the first trading day of a holiday-shortened week and followed losses in global markets amid deepening concerns that the new coronavirus spreading in the world’s second-largest economy could hurt tourism and ultimately economic growth and corporate profits.

Six people have died, and 291 have been infected in China, just as people in the country were preparing to make billions of trips for the Lunar New Year travel season.

Asian stocks closed sharply lower. European markets also fell. Within the S&P 500, stocks of U.S. companies that cater to Chinese tourists had some of the biggest losses, along with general travel companies, such as casinos and airlines.

Industrial, financial and energy companies were among the decliners. Those losses outweighed gains in defensive sector stocks, including real estate, utilities and household goods makers. Traders also shifted money into U.S. government bonds, sending yields lower.

Investors are looking at playbooks for past outbreaks, such as SARS in 2002-2003, where airlines, railways and other transportation companies saw their stocks slide the most, followed by retailers and hospitality companies, according to strategists at Jefferies.

Tuesday’s drop for the index follows a strong run, which had sent the S&P 500 to records. Fears of a possible recession have faded, and investors expect the Federal Reserve to keep interest rates low, and the S&P 500 has risen in 13 of the last 15 weeks.

U.S. companies are in the midst of reporting their earnings results for the last three months of 2019, and early indications are encouraging. Less than a tenth of S&P 500 companies have reported their results so far, but of them, 72% topped analysts’ forecasts for profits. Those forecasts were low, to be sure, with analysts saying S&P 500 profits fell last quarter for the fourth consecutive time, according to FactSet.

KEEPING SCORE: The S&P 500 was down 0.3%, as of 1:58 p.m. Eastern time. It had been down as much as 0.4% earlier in the day.

The Dow Jones Industrial Average dropped 148 points, or 0.5%, to 29,199, and the Nasdaq composite slid 0.4%. The Russell 2000 index of smaller company stocks fell 0.8%.

Stock markets in Europe were broadly lower. Indexes in Asia finished lower.

CHILL IN CHINA: China confirmed many people’s fears late Monday when a government expert said that the new type of coronavirus affecting the country can transmit from human to human, increasing its potential spread.

The outbreak “is developing into a major potential economic risk to the Asia-Pacific region,” said Rajiv Biswas of IHS Markit in a report.

Biswas pointed to the example of the 2003 outbreak of severe acute respiratory syndrome, whose economic impact was felt as far away as Canada and Australia.

US IMPACT: Las Vegas Sands fell 3.9%, and Wynn Resorts fell 6.6% for two of the largest losses in the S&P 500. Both casino companies get most of their revenue from Macau on China’s southern coast.

Other travel companies also slumped on worries that customers may stay away due to virus fears. Royal Caribbean Cruises fell 5%, Delta Air Lines lost 5.5%, and Booking Holdings dropped 3.3%.

EARNINGS PARADE: Halliburton joined the growing list of companies to report stronger results than analysts expected. The oilfield services provider reported a loss for the quarter and a decline in revenue, but the numbers nevertheless topped Wall Street's forecasts. Still, a slide in oil prices weighed on the stock, which lost an early gain and fell 0.1%.

YIELDS: The yield on the 10-year Treasury note slumped to 1.77% from 1.83% late Friday. That helped lift shares in homebuilders broadly higher, as a decline in the 10-year Treasury yield tends to pull mortgage rates lower.KB Home climbed 2.2%.

DRUMMING UP DIVIDENDS: When bonds are paying less in interest, dividend-paying stocks begin to look more attractive to income investors. That helped real-estate investment trusts and utility stocks to rise in particular. American Tower rose 1.5%, while Edison International gained 1.4%.

COMMODITIES: Benchmark U.S. crude fell 5 cents to $58.49 a barrel. Brent crude, the international standard, dropped 40 cents to $64.80.

Gold lost $2.40 to $1,557.90 per ounce.

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AP Business Writer Joe McDonald contributed.

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