Coronavirus fears gripped the US stock market again Thursday, leading Wall Street to give back most of the prior day’s gains.
The Dow Jones industrial average sank as much as 1,033.45 points, or 3.8 percent, as several new coronavirus cases popped up in New York and the airline industry said it’s bracing for plummeting revenues.
The blue-chip index was recently off 995.66 points, or 3.6 percent, at 26,095.20. The S&P 500 and Nasdaq composite tumbled as much as 3.6 and 3.2 percent, respectively.
The plunge continued a roller-coaster week that has seen the market oscillate between huge gains and losses — a typical response after a shock as big as the coronavirus-fueled panic that sent stocks into correction territory last week, according to Chris Rupkey, chief financial economist at MUFG Union Bank.
“It’s kind of like an earthquake — there’s the earthquake, which is last week, and then there’s the aftershocks, which is this week,” Rupkey said.
The Dow surged nearly 1,200 points Wednesday after Joe Biden scored several Democratic presidential primary victories and Congress struck a deal for $8 billion in funding to battle the coronavirus. That came after the Dow set an all-time daily point gain record on Monday, only to drop 786 points Tuesday after the Federal Reserve failed to quell investors’ fears with an emergency interest rate cut.
But the selling continued Thursday after another flow of bad news about the outbreak. Eleven new coronavirus cases were reported across New York Thursday — including two in New York City — a day after California declared a state of emergency following its first death from the disease.
Airline stocks have taken a beating since the start of the epidemic, which has led to international travel restrictions and depressed demand for flights. But things could get worse. The International Air Travel Association warned that the global passenger airline business could lose $113 billion in revenues this year if the virus spreads further — losses not seen since the dark days of the financial crisis.
Southwest Airlines shares dropped as much as 5.8 percent Thursday after the company warned its revenues could take a hit as large as $300 million in the first quarter. Delta shares were recently down 8.1 percent, while United stock was off 10.1 percent and American shares had tumbled 8.1 percent.
“The disruption in travel and trade is intensifying and global equities will likely struggle to keep the fiscal and monetary stimulus rally going as sentiment continues to crumble,” Ed Moya, senior market analyst at OANDA, wrote in a Thursday commentary.
The market volatility has come with massive equity trading volumes, which have averaged 15 billion shares a day since last Wednesday — more than double the daily average for 2019, according to Chris Dearborn, managing director of the Nasdaq Market Intelligence Desk.
“An old trader adage comes to mind that ‘volume validates the move,’” Dearborn wrote in a Thursday newsletter. “This sharp move in equities, coupled with a flight to safety like treasuries and gold, not only shows how jittery investors are but also cast a shadow on future corporate profits, which is the engine that makes the markets go.”
Short-sellers have come away from the recent frenzy with hefty profits. The total domestic equity short interest climbed to $848.3 billion from Feb. 24 to March 3 as the market racked up more than $14.5 billion in additional short-selling, according to financial data firm S3 Partners. Shorters saw their mark-to-market profits jump $51.3 billion, or about 6 percent, in that time, S3 said.
The market’s attention will likely turn to the US Department of Labor’s monthly jobs report on Friday. Wall Street is eyeing a relatively strong hiring number for February as the coronavirus epidemic hasn’t slammed the labor market quite yet, Rupkey said — but a weaker-than-expected report could tank stocks further.
“People could really freak out if that number is already starting to soften,” Rupkey said.
