Dow drops over 300 points on Fed comments, coronavirus worries

Jonathan Garber

U.S. equity markets turned sharply lower Thursday midmorning as investors digested fresh comments from the Fed and rising fears over the coronavirus.

The selling pushed the S&P 500 and the Nasdaq Composite off record highs and clipped over 300 points off the Dow Jones Industrial Average before giving back some of those losses.

Fed Vice Chairman Richard Clarida told CNBC the market was too aggressive in pricing in a Fed rate cut later this year which investors including Keith Fitzgerald of Money Map Press cited as the catalyst for the sudden reversal in the equity markets.

While globally, the People’s Bank of China cut its loan prime rate 10 basis points to 4.05 percent in a move designed to help cushion the Chinese economy from the damage caused by the coronavirus outbreak.

China’s National Health Commission said at least 74,576 people in the country have been sickened by the coronavirus outbreak, which has killed 2,118. The number of cases in South Korea, which reported its first death due to the virus, more than doubled to 82.

Procter & Gamble and Norwegian Cruise Line Holdings were among the U.S.-based companies to warn Thursday that the coronavirus would hit their bottom lines.

P&G said the outbreak would hurt both supply and demand in China.

Meanwhile, Norwegian Cruise Line Holdings reported better-than-expected fourth-quarter results and warned the coronavirus outbreak will put a dent in its bottom line.

Elsewhere, Morgan Stanley reached a deal to buy online broker E-Trade for $13 billion in stock, marking the largest takeover by a Wall Street bank since the financial crisis.

The private-equity firm Sycamore Partners has agreed to buy a controlling stake in L Brands’ Victoria’s Secret for $525 million. Chairman and CEO Leslie Wexner will step aside once the deal is completed.

Meanwhile, shares of space-tourism venture Virgin Galactic were lower for the first time in nine days. Shares were up 223 percent this year through Wednesday.

On the earnings front, ViacomCBS posted a 3 percent drop in revenue in its first earnings report since the two media companies merged late last year.

Six Flags Entertainment lost $11.2 million in the fourth-quarter as park admissions, spending on food and merchandise and sponsorships declined.

Looking at commodities, gold was up 0.9 percent at $1,626 an ounce, its highest in almost seven years. West Texas Intermediate crude oil was also higher by 0.9 percent, trading at $53.80 a barrel.

U.S. Treasurys rallied, pushing the yield on the 10-year note down 5.6 basis points to 1.514 percent.

In Europe, Britain’s FTSE was down 0.2 percent while Germany’s DAX and France’s CAC were off 0.6 percent and 0.5 percent, respectively.

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Asian markets ended mixed with China’s Shanghai Composite gaining 1.8 percent and Japan’s Nikkei adding 0.3 percent. Hong Kong’s Hang Seng slid 0.2 percent.

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