By Kim Khan
Investing.com – Wall Street plunged into the red in early trading Monday as a spike in the number of Covid-19 virus cases confirmed outside of China pushed money out of riskier investments.
The Dow dove 905.27 points, or 3.12%, to 28,087.04 at 9:35 AM ET (14:35 GMT) and the S&P 500 fell 93.63, or 2.8%, to 3,245.62. The Nasdaq Composite plunged 341.72, or 3.6%, 9,234.87, with tech stocks particularly hard hit.
The U.S. Treasury yield curve inverted the most since October and the 10-Year yield fell below 1.37%. Its all-time low is 1.32% hit in 2016 after the Brexit vote.
Worries snowballed over the weekend as the numbers of cases of Covid-19 jumped in Italy, South Korea and Iran. Authorities in Italy imposed a quarantine in the north of the country and its benchmark MIB index tumbled nearly 6%.
The Covid-19 shock is a test of the fear-of-missing-out (FOMO) and buy-the-dip conditioning that has helped stocks overcome the headwinds of valuations, Allianz (DE:ALVG) Chief Economic Adviser Mohamed El-Erian tweeted.
“A key element is whether markets distinguish between Central Banks’ willingness (high) and ability (low) to counter the economic shock,” he said.
High-flying Tesla (NASDAQ:TSLA), which has a factory in Shanghai, was also hit on virus worries, with shares dropping 8.6%.
Expectations that the Federal Reserve would stop in with a rate cut to help the economic situation rose today, with the odds of a March cut rising to more than one in four.
“Growing consensus among economist(s) I am speaking to at (the National Association for Business Economics 2020 conference) is that the Fed will have to cut and do so soon – March – in response to COVID-19,” Grant Thornton Chief Economist Diane Swonk tweeted. “It may not be called a health pandemic yet but it is an economic pandemic.”
Dow Nosedives 900 Points at Open as Pandemic Fears Spur Mass Selling
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