US stocks dropped Monday as the coronavirus crisis stoked fresh US-China tensions and struggling airlines suffered another blow.
The Dow Jones industrial average fell as much as 362.53 points, or 1.5 percent, to 23,361.16 as the Trump administration’s efforts to blame China for the pandemic sparked fears of a new trade war.
The S&P 500 also dropped as much as 1.1 percent by midday with airline shares plummeting after investment maven Warren Buffett revealed that he dumped his company’s stake in major US carriers.
But the tech-heavy Nasdaq managed to climb as much as 0.6 percent, thanks in part to solid gains for tech giants Amazon, Microsoft, Netflix and Tesla.
“Investors are jumping out of airlines, financials and real estate and overloading on big tech,” OANDA senior market analyst Ed Moya said in a commentary. “Airlines might not see a return to prior crisis levels for a couple years and low interest rates are here for the foreseeable future. Tech is where everyone wants to be.”
Monday’s dip followed a weekend in which President Trump accused China of trying to cover up the coronavirus outbreak and Secretary of State Mike Pompeo said there’s “enormous evidence” that the pandemic began in a Wuhan lab.
The comments came after Trump threatened new tariffs against China in response to Beijing’s handling of the outbreak. The fresh tensions have investors worried about the two nations restarting the trade war that was partially settled less than four months ago.
“This could have a serious impact on the risk appetite of investors, as there are already plenty of uncertainties caused by the COVID-19 pandemic, and a continuation of the trade war would be a nightmare come true,” said Milan Cutkovic, market analyst at AxiCorp.
Monday marked the third straight trading day in which Wall Street clawed back some of its gains from the past month. The recent rally drove the Dow about 35 percent above the low it reached in March as the coronavirus gripped the world.
Investors are bracing for more bad news about the pandemic’s economic impact following the recent jolt of optimism on Wall Street, according to Jim Paulsen, chief investment strategist at the Leuthold Group.
For instance, economists surveyed by the Wall Street Journal expect Friday’s US jobs report to show the unemployment rate hitting 16.1 percent in April, the highest since modern records began in 1948.
“We’re bound to have more disappointments down the road and this market’s just way overvalued because of that,” Paulson said. “A lot of it is tied to this disconnect between what Wall Street’s done and what Main Street is doing.”
With Post wires
