by Ian Harvey
February 25, 2020
Reported coronavirus cases
outside of China, fueled fears of a prolonged global economic slowdown, sparking a surge in Monday’s sell-off.
There are now 79,339 cases of COVID-19 — the infectious disease derived from the novel strain of coronavirus that reportedly originated in Wuhan, China, last year — in 30 countries, and 2,619 deaths, according to the latest figures from the World Health Organization.
The Dow dropped dramatically yesterday based on this news, turning in a 1,031-point loss, its third-worst single-session drop ever. The blue-chip index has now given up its year-to-date gains in just one day, as COVID-19 continues to spread to more countries outside of China.
South Korea reported a large number of new cases, while Italy and Iran also have a significant number of people infected as well.
South Korea raised its infectious disease alert to its highest level on Sunday but the European Union saw “no need to panic” over the outbreak in Italy.
In the United States, the Centers for Disease Control and Prevention said there were 53 people infected with the virus, up from 34 on Friday. Nearly all the new infections involve former passengers on the Diamond Princess cruise ship docked in Japan, who have been quarantined on military bases in California and Texas.
Over the weekend, Xi Jinping also called the coronavirus a "crisis and a test" for the world's second largest economy as the number of confirmed cases rose past 77,000, taking the death toll close to 2,600.
The S&P 500 and Nasdaq turned in equally nasty setbacks, the latter suffering its steepest single-day drop in years. As global markets panic, Wall Street's "fear gauge," the Cboe Volatility Index (VIX) logged its highest close since December 2018.
Also, Monday’s selloff marks the first time all three major benchmarks — the Dow, the S&P 500 Index, and the Nasdaq Composite Index — each fell by at least 3% on the same day since Dec. 4, 2018, according to Dow Jones Market Data.
Finance chiefs of the world’s top 20 economies vowed to monitor the impact of the coronavirus outbreak on global growth and act if needed, as they said loose monetary policy and easing trade tensions would prompt a pick-up in 2020 and 2021.
It is expected that global growth will pick
up modestly in 2020 and 2021. The recovery is supported by the continuation of
accommodative financial conditions and some signs of easing trade tensions.
The Final Outcome…..?
Despite all the relative carnage being endured by the market, stocks have a tendency to rebound after a hit of at least 2%, Dow Jones Market Data shows.
The past 10 times that the S&P 500 index fell by as much as 3%, for example, it declined 0.27%, on average, in the next trading session. However, the average performance improved dramatically in the following week, month and year
Also, over the past 11 years, declines of more than 2% for the S&P 500 have tended to see healthy rebounds, particularly when that daily slide happens on a Monday.
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