U.S. Stocks Slide as Chinese Viral Outbreak Picks Up - The Wall Street Journal

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Akane Otani

The Wall Street Journal

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akane.otani@wsj.com

Caitlin Ostroff

The Wall Street Journal

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Updated Jan. 30, 2020 10:53 am ET

U.S. stocks edged lower Thursday, weighed down by declines among shares of airlines, cruise operators and consumer companies whose profits are vulnerable to fallout from an intensifying coronavirus outbreak.

The Dow Jones Industrial Average dropped 177 points, or 0.6%, to 28557. The S&P 500 fell 0.8%, and the Nasdaq Composite lost 0.7%.

More than 7,700 people have been infected and 170 individuals have died from the new coronavirus since it was identified in December. The virus threatens to further slow down growth in China, the world’s second-largest economy, as officials restrict travel and companies close factories, cancel flights and take other steps to contain the virus’s spread.

That could in turn take further steam out of the stock market, analysts and investors say. Before the outbreak began, stock indexes around the world had risen to records, bolstered by bets that global economic growth would pick up slightly this year.

Because China is a key engine for the global economy, investors and analysts say a worsening of the outbreak could have widespread ramifications reaching beyond Asia.

“I just don’t think the panic has reached its peak yet,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

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That being said, Mr. Frederick said he was taking comfort in the fact that the market has historically been resilient following prior outbreaks.

“We were at all-time highs just last week. It’s not like things are crumbling,” Mr. Frederick said.

Thursday’s market declines were offset in part by rallying technology shares.

Tesla jumped 11% after the electric-car maker exceeded Wall Street’s estimates for fourth-quarter adjusted profit and pledged to increase vehicle sales by more than a third this year.

Microsoft gained 2.3% after the software maker said its cloud business helped drive profits, while sales climbed to a record, beating analysts’ expectations.

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Shares of companies with big presences in China continued their recent slide, though.

Royal Caribbean Cruises, which canceled a four-day cruise Monday that was set to depart from Shanghai, fell 4.2%. Starbucks, which has closed more than half of its stores in China, lost 1.6%, while Yum Brands, the parent company of fast-food chains KFC and Taco Bell, slipped 1.4%.

Stocks elsewhere around the world were mostly lower, with the Stoxx Europe 600 down 1.2% and Hong Kong’s Hang Seng losing 2.6%.

“We have yet to see the bottom,” said Alex Au, managing director at Alphalex Capital Management, a Hong Kong-based hedge fund. He said the “climax of the contagion” could occur when the holiday period ends next week and many people in China return to work. Markets on the mainland are scheduled to remain closed until Feb. 3.

Hong Kong is among cities where cases of the new coronavirus have been confirmed. Photo: jerome favre/Shutterstock

Shares of European telecommunications company BT Group slid 6.5%. The firm said the British government’s decision to limit its use of equipment from China’s Huawei to build part of its 5G cellular network will cost the U.K. company about £500 million ($655 million) over the next five years as it seeks other suppliers.

The British pound climbed 0.6% against the U.S. dollar after the Bank of England decided to keep rates steady ahead of the U.K.’s pending exit from the European Union.

The move came after traders who had bet on a rate cut unwound their earlier positions, said Kallum Pickering, a senior economist at Berenberg.