Dow off nearly 1,000 points as virus pummels US stocks again

Wall Street stocks were in free-fall again on Friday morning, suffering another steep decline as fears of an economic slowdown due to coronavirus again pummeled global markets.

There were fresh signs of the economic hit, with United Airlines announcing it was grounding more flights to Asia, and survey results suggesting a big impact on shopping malls if the virus grows in the US.

"The risk of pandemic is rising and the human toll as well as the economic cost are not knowable," said FHN Financial's Chris Low. "Investor fear is understandable when earnings are in doubt."

Near 1545 GMT, the Dow Jones Industrial Average was down nearly 1,000 points, a drop of another 3.8 percent to 24,783.81. The index already had shed more than 11 percent this week heading into Friday's session.

The broad-based S&P 500 sank 3.5 percent to 2,875.33, while the tech-rich Nasdaq Composite Index plunged 2.8 percent to 8,324.14.

US and global stocks were poised to conclude their worst week since 2008, reflecting diminishing expectations for the global economy due to the Covid-19 epidemic in China and the spread of the illness to other countries.

The number of new coronavirus cases in the world rose to 83,853, including 2,873 deaths, across 56 countries and territories, according to data from official sources.

"It is becoming clear that this year's high earnings growth expectations are unlikely to be met, so stretched valuations ... are being reined in and speculative excess is being wrung out of stock prices," said Briefing.com analyst Patrick O'Hare.

But some investors are also eyeing the pullback as a potential buying opportunity.

"There is significant evidence mounting there is likely to be a sharp oversold rally," said a note from Canaccord Genuity equity strategist Tony Dwyer.

"For now, just expect a sharp snapback rally that will likely be tested, which should prove a terrific buying opportunity given the fundamental backdrop of an easy Fed, historically low rates, full employment, and widely available credit."

Losses were broad-based, with Dow members Boeing, Coca-Cola, Johnson & Johnson and Walmart all off more than five percent.

United Airlines dropped 2.6 percent as it announced it was reducing flights to Tokyo, Singapore and other leading markets, and extending a grounding to airports in China.

Markets post heavy losses

The worsening global threat from the virus prompted investors to rapidly step up bets the US Federal Reserve would need to cut interest rates as soon as next month to support economic growth.

"We don't even need to wait for economic data to see how badly the economy is being hit.

You can tell that the sales of airlines and hotels are already falling by a half or something like that," said Tomoaki Shishido, senior economist at Nomura Securities.

"It is fair to say the impact of the coronavirus will be clearly much bigger than the US-China trade war. So the Fed does not have a reason to take a wait-and-see stance next month," he said.

The CBOE volatility index, often called the "fear index", jumped to 39.16 on Thursday, the highest level in about two years, well out of the 11-20 range of recent months.

The index, which measures expected swings in US shares in the next 30 days, often shoots up to around 50 as bear market selling hits its heaviest although it approached 90 during the 2008-09 financial crisis.

In Asia, MSCI's regional index excluding Japan shed 1.4 percent. Japan's Nikkei gave up 3.3 percent on rising fears the Olympics planned in July-August may be called off due to the coronavirus.

Australian shares dropped 2.8 percent to a six-month low while South Korean shares shed 2.1 percent.

"The coronavirus now looks like a pandemic. Markets can cope even if there is big risk as long as we can see the end of the tunnel," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

"But at the moment, no one can tell how long this will last and how severe it will get."

The global rout knocked mainland Chinese shares lower, which have been relatively well supported this month, as new coronavirus cases in the country fell and Beijing doled out measures to shore up economic growth.

CSI300 index of Shanghai and Shenzhen shares dropped 2.4 percent, on track to post its first weekly loss in three.

Fears of a major economic slump sent oil prices to their lowest level in more than a year.

US crude futures fell 1.6 percent to $46.35 per barrel, having lost 13.2 percent so far on the week, which would be the deepest fall in more than five years.

High-grade bonds

As investors flocked to the safety of high-grade bonds, US yields plunged with the benchmark 10-year notes yield hitting a record low of 1.241 percent. It last stood at 1.274 percent.

That is well below the three-month bill yield of 1.439 percent, deepening the so-called inversion of the yield curve.

Historically an inverted yield curve is one of the most reliable leading indicators of a US recession.

As investors rushed to safe assets, gold stood at $1,646.4 near seven-year high of $1,688.9 hit earlier this month.

In currency markets, the yen rose to a three-week high of 109.33 to the dollar and last stood at 109.40.

The euro stood at $1.0993, having jumped over 1 percent in the previous session, the biggest gain in more than two years as investors wound back bets against the currency versus the dollar.