LISTEN LIVE

Dow Drops 1,900 Points In 2 Days As Markets Sell Off On Fears Of Coronavirus Spread

Feb 25, 2020
Originally published on February 26, 2020 8:17 am

Stocks fell sharply for a second day in a row. The Dow dropped 879 points on Tuesday, after tumbling more than 1,000 points on Monday.

While the coronavirus outbreak in China appears to have peaked, investors are worried by the growing number of cases in other countries, as well as a warning from U.S. health officials that the virus could hit closer to home.

Just last week, the S&P 500 stock index was hitting record highs. Now it's fallen more than 6% in just the last two days.

Financial analyst Greg McBride of Bank Rate says mini outbreaks of coronavirus in Italy, Iran, and South Korea have left investors wondering where the virus will strike next.

"Markets hate uncertainty," McBride said. "And right now there is a ton of uncertainty about the coronavirus and what impact does this have on economic growth, both globally as well as here in the U.S."

The Centers for Disease Control and Prevention seemed to amplify those worries Tuesday when officials warned that Americans should prepare for a possible spread of the coronavirus in the U.S.

As investors dumped stocks, some sought the shelter of government bonds. McBride says that pushed the yield on the benchmark 10-year Treasury note to an all-time low: barely above 1.3%.

"Those low interest rates are a reflection of the fear that a lot of investors have globally about slower economic growth," McBride said.

President Trump often points to a booming stock market as a barometer of his own performance. With the market tanking for the second day in a row, White House economic adviser Larry Kudlow tried to do some damage control. Kudlow told CNBC that while the coronavirus has exacted a heavy human toll, especially in China, there's little evidence so far that it's hurting the US economy.

"The head of the World Health Organization said today, let us not overreact," Kudlow said. "On the economy ... there is no tragedy in the United States."

Federal Reserve Vice Chairman Richard Clarida told a gathering of economists this afternoon the central bank is monitoring the epidemic closely. He said it's too soon to speculate about the effects on the global economy.

There is some upside to the this week's market turbulence. McBride says the record low yield on government bonds will likely push mortgage rates even lower, giving a lift to the U.S. housing market.

"If you're a homebuyer, if you can find a house to buy, from a mortgage standpoint you've got a little bit more buying power at your back," he said.

McBride says long-term investors might also find some bargains in the beaten-down stock market. But, he cautions, the wild market swings are likely to be with us for a while.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

MARY LOUISE KELLY, HOST:

Coronavirus concerns triggered another steep drop on Wall Street today. The Dow Jones Industrial Average fell nearly 900 points. That is on top of yesterday, when it tumbled more than a thousand points. The outbreak in China appears to have peaked, but investors are worried about the growing number of COVID-19 cases in other countries and a warning from U.S. health officials that the virus could hit closer to home. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: Just last week, the S&P 500 stock index was hitting record highs. Now it's fallen more than 6% in just the last two days. Financial analyst Greg McBride of Bankrate.com says many outbreaks of coronavirus in Italy, Iran and South Korea have left investors wondering where the virus will strike next.

GREG MCBRIDE: Markets hate uncertainty. And right now, there is a ton of uncertainty about the coronavirus and what impact does this have on economic growth, both globally, as well as here in the U.S.

HORSLEY: The Centers for Disease Control and Prevention seemed to amplify those worries today when officials warned that Americans should prepare for a possible spread of the coronavirus in this country. As investors dumped stocks, some sought the shelter of government bonds. McBride says that pushed the yield on the 10-year Treasury note to an all-time low - barely above 1.3%.

MCBRIDE: Those low interest rates are a reflection of the fear that a lot of investors have globally about slower economic growth.

HORSLEY: President Trump often points to a booming stock market as a barometer of his own performance. With the market tanking for the second day in a row, White House economic adviser Larry Kudlow tried to do some damage control. Kudlow told CNBC while the coronavirus has exacted a heavy human toll, especially in China, there's little evidence so far that it's hurting the U.S. economy.

(SOUNDBITE OF ARCHIVED RECORDING)

LARRY KUDLOW: The head of the World Health Organization today said, let us not overreact. I think that's an important point. I will make the same point on the economy. The economic side - there is no tragedy in the United States.

HORSLEY: There is some upside to this week's market turbulence. McBride says those rock bottom Treasury yields are likely to push mortgage rates even lower.

MCBRIDE: If you're a homebuyer, if you can find a house to buy, from a mortgage standpoint, you've got a little bit more buying power at your back. These lower rates mean that monthly payment's going to be just a little bit lower.

HORSLEY: McBride says long-term investors might also find some bargains in the beaten-down stock market.

MCBRIDE: If you're willing to buckle your seat belt and ride out this volatility, yes, you can buy stocks at a discount versus what it was selling at just a week ago.

HORSLEY: McBride cautions, though, the wild market gyrations are likely to be with us for a while, so long as the full extent of the coronavirus epidemic and the resulting economic fallout remain unknown.

Scott Horsley, NPR News, Washington.

(SOUNDBITE OF FLASH AND THE PAN SONG, "WALKING IN THE RAIN") Transcript provided by NPR, Copyright NPR.