Investors are proving increasingly worried about the coronavirus and its effects, renewing anxieties of recession.
Health officials have now warned it is only a matter of time before the virus becomes a public health threat in the U.S.
The Centers for Disease Control and Prevention, the National Institutes of Health and other agencies are emphasizing that they view the spread as a matter of not “if” but “when.”
Tuesday’s market drop comes a day after more than 1,000 points were lost in one of the steepest losses in history on Monday.
“Stocks are due for a bumpy ride as the market assesses the growing likelihood of a broad economic downturn,” said Ball State University economist Michael Hicks. “The economic fundamentals of recession in China and the increasing risk of Covid-19 clearly point to more losses. This is not just a few spooked investors.”
The S & P 500 and Nasdaq were both down 3.2% and 2.9%, while the Dow was down 3%.
Meanwhile the yield on the 10-year Treasury note, a key benchmark, fell to 1.32 percent as investors fled to safety amid growing alarm the global economy is pulling back. Yields drop as the price of bonds rise.
The market reactions reflect fear that the coronavirus will have severe economic impacts worldwide. Anticipating a global economic slowdown, the safest, most liquid investments are in U.S. Treasuries.
Larry Kudlow, a Trump economic advisor, says there is optimism that China’s economy will rebound quickly and thinks long term investors should buy stocks. “We have contained this. We have contained this. I won’t say airtight, but pretty close to airtight,” Kudlow told CNBC.
Also, Trump said on Tuesday that the market would crash if he wasn’t re-elected, “like you’ve never seen before.”
See Washington Post for source information.