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US close: Dow and S&P 500 on track for worst week since 2008

By Iain Gilbert

Date: Thursday 27 Feb 2020

US close: Dow and S&P 500 on track for worst week since 2008

(Sharecast News) - US stocks recorded more losses on Thursday as major indices dipped into correction terror after the Wuhan coronavirus continued to spread and some more big names warned on guidance.
At the close, the Dow Jones Industrial Average and S&P 500 were both down 4.42% at 25,766.64 and 2,978.76, respectively, while the Nasdaq Composite saw out the session 4.61% weaker at 8,566.48.

The Dow closed 1,190.95 points lower, its biggest one-day decline in history, after the benchmark index saw out the previous session in the red and the S&P 500 fell even further to continue its worst three-day run in four years.

The losses on Thursday saw the S&P 500 breach its 200-day moving average for the first time in nine months, while both the Dow and S&P 500 were on pace for their worst weekly performance since 2008.

The 10-year Treasury yield was also trading at a record low of 1.25%, while gold prices rose 0.25% to $1,645.04 per ounce amid concerns over the coronavirus outbreak spreading even further and after a Food and Drug Administration official said the coronavirus was on the cusp of being declared a pandemic.

South Korea announced another 169 cases, bringing its total to 1,146, while Italy said infections now totalled 325 and were being seen outside of the original epicentre in the country's north. China reported 406 new confirmed cases and a further 52 deaths.

Donald Trump's televised address overnight on the coronavirus, which saw him place Vice President Mike Pence in control of managing the outbreak, also seemingly failed to calm markets as his optimistic tone was paired with warnings from health experts.

IG analyst Chris Beauchamp said: "It has been another session of heavy selling, not so much a 'sea of red' as a whole ocean. Stocks, the old saying has it, take the stairs up and the lift down, and this has been brutally demonstrated over the past week. Gains that took weeks to acquire have been demolished in the space of hours, as the selling reaches indiscriminate levels.

"There are few signs of a recovery, and the price is certainly not showing signs of life, but market breadth is rapidly reaching 'washout' levels. The problem is that such selloff usually do not bottom on a single day, but can see a brief but vicious rally before falling back again. Volatility begets volatility, leading to tough times for investors but possible rich pickings for traders."

On the macro front, jobless claims in the US edged slightly higher last week. According to the Department of Labor, initial unemployment claims rose by 8,000 to reach 219,000 during the week ending on 22 February (consensus: 215,000).

Elsewhere, data on orders in the States for goods made to last more than three years in January came in much stronger than expected, while orders for civilian aircraft more than trebled. According to the Department of Commerce, durable goods orders slipped at a month-on-month pace of 0.2% to reach $246.2bn.

Lastly, pending home sales rose 5.2% in January and were 5.7% higher year-on-year, according to the National Association of Realtors.

"This month's solid activity - the second-highest monthly figure in over two years - is due to the good economic backdrop and exceptionally low mortgage rates," said the NAR's chief economist Lawrence Yun.

In the corporate space, shares in tech giant Microsoft were down 7.05% at the close after the company warned shareholders that its operations in China were returning to normal at a slower than expected pace, while PayPal shares were down 1.16% after also issuing a warning on its outlook.

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