US stocks have been sold off as a spike in new coronavirus cases in China and other countries and as data showing US business activity stalled in February fuelled investors’ fears about the economy.
Declines on Friday were led by heavyweights Microsoft, Amazon.com and Apple for a second straight day.
The S&P technology index dropped 2.4 per cent. Chipmakers, with strong ties to China for revenue, also fell sharply, with the Philadelphia Semiconductor index falling 3 per cent.
China reported a jump in new cases on Friday, while South Korea became the latest hot spot with 100 new cases and more than 80 people tested positive for the virus in Japan.
“It’s creating a wildcard,” for companies and others, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “Going into a weekend not so long after the stock market was hitting highs, people are taking some money off the table.”
The impact could extend beyond the first quarter, he said.
Apple earlier this week warned on sales due to the impact of the virus outbreak.
The worries pushed up Wall Street’s fear gauge, the CBOE volatility index, and caused investors to seek safe-haven assets.
Gold and bond prices rose, while defensive equity sectors – utilities, real estate and staples – all rose.
The IHS Markit Purchasing Managers’ index of services sector activity dropped to its lowest level since October 2013, signalling a contraction for the first time since 2016. The manufacturing sector also clocked its lowest reading since August.
The Dow Jones Industrial Average fell 262.56 points, or 0.9 per cent, to 28,957.42, the S&P 500 lost 39.79 points, or 1.18 per cent, to 3,333.44 and the Nasdaq Composite dropped 189.39 points, or 1.94 per cent, to 9,561.57.
Hopes of monetary easing by major central banks had propelled the benchmark S&P 500 and the tech-heavy Nasdaq to all-time highs earlier this week, but the indexes are on course for their first weekly decline in three weeks.
Among other stocks, Dropbox jumped after it raised its outlook for operating margin, and Deere & Co rose after an unexpected rise in first-quarter profit.
Sprint Corp climbed 5.7 per cent as it announced new merger terms with T-Mobile US that would reduce the stake of major Sprint shareholder SoftBank. T-Mobile shares dipped 0.9 per cent.
Declining issues outnumbered advancing ones on the NYSE by a 2.13-to-1 ratio; on Nasdaq, a 2.23-to-1 ratio favoured decliners.
The S&P 500 posted 30 new 52-week highs and 8 new lows; the Nasdaq Composite recorded 70 new highs and 54 new lows.