Major world stock markets either entered or flirted with official correction territory on Thursday, as a broad-based sell-off of just about everything continued to spread in conjunction with the coronavirus.
The Dow Jones Industrial Average lost another 730 points on Thursday morning, down another 2.5 per cent. Earlier it was down by more than 900 points. Added to the 2,388 points the closely watched group of 30 influential U.S. stocks has lost in its previous five sessions means the Dow is now down about 3,000 points from its recent high — a decline of more than 10 per cent.
In the investment community, a decline of 10 per cent is the official definition of a correction.
Other stock indexes are following suit. The technology-focused Nasdaq lost 267 points on Thursday, bringing its one-week total down more than 11 per cent. The broader S&P 500 is off by about two per cent and is now on track for its worst week since November 2008, during the global financial crisis.
Toronto’s main stock index is holding up comparatively better, but only because there are so many gold companies on the TSX. Gold is typically a safe haven during times of uncertainty, and the widespread fears of the economic impact the coronavirus will have on the world economy certainly qualifies.
The price of gold gained another $15 on Thursday to trade at $1,656 US an ounce. Before this week, the price of the precious metal hasn’t been that high since 2013.
New clusters are emerging in Italy, South Korea and Iran this week, and on Wednesday the U.S. saw its first case where the area of transmission hasn’t been identified — suggesting the person may have gotten the disease at home in the U.S.
“Although the number of active cases in China, where the coronavirus outbreak started, continues to decline, fears of growing outbreaks in other countries and growing uncertainty about the economic impact, continues to rattle investors and dampen enthusiasm for stocks,” said Colin Cieszynski, chief market strategist at SIA Wealth Management in Toronto.
Philip Marey, senior U.S. strategist at Rabobank, said that in the past week, “markets have come to realize that the outbreak is much worse and are now realistically pricing in the impact of the virus on the economy.”
In that sense, he said, “it’s a bit of a catching up from the relative optimism that was there in the beginning when markets thought (the virus) will be contained to China with some minor outbreak outside.”
Canadian banks posted quarterly results this week, and while the underlying numbers were largely positive, all of them have sold off on fears of an economic slowdown. The price of oil has also plunged this week on fears of reduced demand, and that has hit shares in energy companies hard.
Airline stocks have been hammered too, as global travel slows down. Air Canada shares were down another three per cent on Thursday, and off by more than a third of their value in the past month.
Shares in American Airlines plunged 8.5 per cent as the airline continues to feel pain from disrupted travel plans and suspended routes. Delta Airlines, which is reducing flights to South Korea because of the outbreak in that nation, fell 4.5 per cent.