By Dave Sebastian
Shares of companies with exposure to travel and tourism dropped Monday as U.S. stocks skid amid mounting cases of novel coronavirus outside of China.
Italy Monday reported a sixth death from the coronavirus, as authorities imposed quarantines and other restrictions in the country's economic heartland to fight what is now the world's third-biggest national outbreak after those in China and South Korea.
American Airlines Group Inc. shares slid about 10% to $25.04. Delta Air Lines Inc.'s stock fell about 7.2% to $53.72, United Airlines Holdings Inc.'s stock fell 4.1% to $74.78 and Southwest Airlines Co. shares fell 4.7% to $53.90. The epidemic, originating in the central Chinese city of Wuhan, has disrupted global travel and supply chains, with airlines canceling flights to China.
American depositary shares of Chinese airlines declined, with China Southern Airlines Co. falling 5.2% to $27.82 and China Eastern Airlines Corp. falling 4.6% to $22.64.
Stocks of cruise companies also took a hit. Cruises have drawn outsize attention for becoming incubators for the pathogen. Shares of Carnival Corp., whose Diamond Princess cruise turned into a quarantine for more than 600 coronavirus patients, fell around 7% to $38.75.
Shares of Norwegian Cruise Line Holdings Ltd., which despite having no base in China has canceled voyages in Asia through September, fell about 8.7% to $42.90. Royal Caribbean Cruises Ltd. shares fell around 7% to $98.77.
The selloff has dragged down stocks of online-travel agencies and metasearch companies. Booking Holdings Inc. shares fell 6.8% to $1797.08, Expedia Group Inc. shares fell 6.9% to $111.88 and TripAdvisor Inc. shares fell 4.5% to $27.01. American depositary shares of the Chinese online-travel agency Trip.com Group Ltd. fell 5.5% to $31.23.
Lodging companies' stocks also sold off. Hyatt Hotels Corp. shares fell 6.1% to $89.15, Marriott International Inc. shares fell 4.9% to $136.28 and Hilton Worldwide Holdings Inc. shares fell 4.3% to $104.88. American depositary shares of InterContinental Hotels Group PLC declined 6.1% to $61.13.
Though opportunities are likely to resurface after the epidemic resolves, the effect on leisure companies could be longer term, said Chris Gaffney, the president for world markets at TIAA Bank.
The epidemic's expansion outside of China "sent shivers into investors that this could grow into more of a pandemic," Mr. Gaffney told The Wall Street Journal. World Health Organization Director-General Tedros Adhanom Ghebreyesus Monday said the epidemic hasn't morphed into a pandemic, though it has the potential to.
An epidemic generally refers to a disease that has spread over a large geographic area over a long period of time. A pandemic is an epidemic that has spread over many continents and countries, affecting large numbers of people.
In Macau, the two-week closure of casinos has weighed on the gaming enclave's gross gaming revenue, though many have resumed operations last week. Shares of Wynn Resorts Ltd. fell about 3.8% to $123.05, MGM Resorts International declined 4.7% to $29.92 and Las Vegas Sands Corp. fell 3.9% to $63.07.
With individual travel visas for visits by mainland China residents and group travel suspended, Macau's gross gaming revenue could plunge 90% in February and 80% in March, assuming no significant improvement in travel, according to Bernstein Research analyst Vitaly Umansky.
Lauren Goodwin, an economist and multi-asset portfolio strategist at New York Life Investments, said the asset manager is defensive on its portfolio as the epidemic remains a risk over the long-term unless infection cases diminish or the development of antiviral drugs materially progress.
"The more this virus prevails, the more likely it is that the Fed will step in," Ms. Goodwin told the Journal. "When you have monetary accommodation, you can have equity prices move higher."
The Dow Jones Industrial Average fell 3.3% to 28041.12 in early afternoon trading.
Write to Dave Sebastian at email@example.com
Corrections & Amplifications
This article was corrected at 1:27 p.m. ET because the original article misstated Ms. Goodwin's direct quote that equity prices can move higher.