Stock futures were up just slightly in overnight trading after stocks’ worst two-day rout in more than four years amid heightened concern the coronavirus will upend global economic growth.
To be sure, futures trading this early may not be a signal the selling will end on Wednesday. Futures bounced initially Monday evening before the market fell again on Tuesday. Investors are awaiting updates on the coronavirus infections around the world, especially in China, South Korea and Italy.
Stocks plunged for a second day on Tuesday, with the Dow tumbling 879 points, bringing its two-day losses to nearly 1,900 points. The S&P 500 wiped out a whopping $1.7 trillion in just two sessions. The equity benchmark nosedived 6.3% since Monday, suffering its biggest two-day drop since August 2015.
“Investors are clearly expecting more bad news — and rather than wait for it, they are selling,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said in a note. “There are signs in the electronics and auto industries that the slowdown is already happening, which will be a drag on growth. This risk is largely behind the recent pullback in global markets.”
Meanwhile, the yield on the benchmark 10-year Treasury note fell to a record low of 1.31% on Tuesday as coronavirus fears raised concerns about global economic growth and sent investors scrambling into the safety of U.S. government bonds.
The sell-off accelerated after U.S. health officials warned that the coronavirus is “likely” to continue to spread throughout the U.S. and outlined what schools and businesses should do if the disease becomes an epidemic.
The S&P 500 tech sector entered correction territory Tuesday, falling 10% from its 52-week high, after posting a fresh record close just last Wednesday. Apple was down 3.3%, bringing its week-to-date losses to nearly 7%.
The Cboe Volatility Index, known as the market’s “fear gauge,” spiked more than 11% to close at 27.85, the highest close since Dec. 2018. The VIX, a measure of the 30-day implied volatility of U.S. stocks, crossed 30 at its session high on Tuesday as coronavirus fears rattled the markets.
“Investors need to be prepared for the risk of a market correction,” Pramod Atluri, a portfolio manager at Capital Group’s, said in an email. “It should not come as a surprise that heightened global uncertainty – like news about the further spread of coronavirus and its impact on global supply chains – can hurt valuations which in some areas look priced to perfection.”
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