Stocks close with steep losses driven by coronavirus fears

Stocks close with steep losses driven by coronavirus fears
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Stocks fell sharply Monday as the international scramble to contain the coronavirus raises fears of a harsh economic blowback.

The Dow Jones Industrial Average closed with a loss of 453 points, falling 1.6 percent to reverse its 2020 gains. The S&P 500 index also fell 1.6 percent, while the Nasdaq Composite sunk 1.9 percent.

Monday’s losses followed a sharp rise in confirmed diagnoses of the lethal coronavirus, a respiratory illness that originated in central China and has spread to more than 2,700 cases in China, killing 81.


The Centers for Disease Control and Prevention (CDC) confirmed five cases of coronavirus in the U.S. by Sunday, and announced Monday that it was monitoring 110 people in 26 states for potentially contracting the illness. 

Chinese officials have taken extensive measures to prevent the spread of the coronavirus, disrupting the country's Lunar New Year celebration with quarantines and travel restrictions. The CDC and State Department have also warned Americans not to travel to China unless necessary.

The economic disruption in China triggered losses across several sectors that depend on steady international travel or sales in the rapidly expanding Chinese consumer market. Stocks for airlines, travel companies, cruises, resorts and casinos all fell between 2 percent and 8 percent.

A prolonged outbreak in China could dampen the country’s already slowing economy, a key driver of global growth, as the world braces for a sluggish 2020. A rapid increase in cases reported beyond China could drive even broader declines in economic activity, according to experts. 

“If the epidemic spreads globally, or if the number of deaths rises sharply, the knock-on impact on the global economy could be high, especially if international air travel is severely disrupted as a result of the epidemic,” wrote Agathe Demarais, global forecasting director at The Economist Intelligence Unit, in a Monday research note.

“If Chinese growth drops by 1 percentage point, an initial assessment shows that global growth in 2020 will be reduced by at least 0.1-0.2 percentage points, to 2.1-2.2% (from a forecast 2.3% currently),” she added.