By Chong Koh Ping, Anna Isaac and Caitlin McCabe
Investors around the world stepped up their retreat from stocks and piled into haven assets like government bonds and gold, reflecting escalating worries that the coronavirus will crimp global growth.
The Dow Jones Industrial Average dropped more than 1,000 points; the yield on the benchmark 10-year Treasury note approached its record low; and gold prices climbed for the eighth straight session to a fresh seven-year high.
U.S. stocks had been relatively resilient in the wake of the epidemic. The S&P 500 and technology-heavy Nasdaq Composite set records as recently as Wednesday but have dropped 4.5% and 6%, respectively, over the past three sessions as a rapid increase of cases outside China has spooked investors.
"I think [this weekend] opened the eyes of the investment community and it definitely opened the eyes of the World Health Organization," said Carter Henderson, a portfolio manager at Pittsburgh-based Fort Pitt Capital Group.
The blue-chip index fell 1,056 points, or 3.6%, on track for its biggest one-day point decline since February 2018. The S&P 500 declined 3.6%, with all 11 sectors posting declines. Both indexes erased their gains for the year.
The Nasdaq Composite suffered the steepest losses, dropping 4.1%. Tech stocks have continued to lead the market this year, and the Nasdaq is hanging on to a 2.4% gain for 2020.
Energy, technology and consumer-discretionary stocks posted the biggest declines in the S&P 500, all falling about 3%. Oil company Hess Graphics slid 6.9%, while graphics chip maker Advanced Micro Devices fell 6.2% and department-store operator Macy's declined 4.6%.
Airlines and travel-related stocks were hit particularly hard. American Airlines dropped 8.5%, Norwegian Cruise Line Holdings dropped 8.4% and Booking Holdings--the operator of Priceline and Kayak--declined 6.7%.
The flight from stocks coincided with a push into haven assets. Gold prices rose 1.6% to $1,674.60 a troy ounce. Increased demand for U.S. government bonds sent the yield on the benchmark 10-year Treasury note down to 1.367%, approaching the 2016 all-time closing low of 1.364%, according to Tradeweb.
"The rally of haven assets such as gold reflects surging demand for safety during a time of uncertainty," said CMC Markets analyst Margaret Yang. "Things will probably get worse before it gets better."
The Cboe Volatility Index, or VIX, jumped to 24.20, on track to close at its highest level since early August. The options-based gauge tends to rise when markets fall and investors reach for insurance-like contracts to protect their portfolios. Near-dated futures contracts tracking the index also jumped above those expiring in later months, a sign that many investors are bracing for more volatility.
Meanwhile, Brent crude dropped 5.3% to $54.86 a barrel. Oil prices have declined in recent weeks on investors' concerns that the viral outbreak would sap demand for crude.
After weeks of new highs among major U.S. stocks indexes, market gains started to unravel last week, as it became increasingly clear that the coronavirus outbreak will disrupt global supply chains more than originally anticipated. Those concerns worsened over the weekend after a surge of cases were reported in South Korea, Iran and Italy.
So far in Italy, six people have died from the illness, making it the world's third-biggest national outbreak after China and South Korea. More than 50,000 people remain under quarantine in the country.
In an update Monday, the World Health Organization said China has reported a total of 77,362 cases of the coronavirus, including 2,618 deaths. The Geneva-based organization said the number of cases is declining in China, even as they increase elsewhere.
Apple last week became the first major U.S. company to say it won't meet revenue projections for the quarter due to the epidemic. Several other companies, including Procter & Gamble and Royal Caribbean Cruises, followed suit, warning that they expected the epidemic to impact their financial performances.
"Clearly this selloff today is pretty dramatic and there's no question that the selloff in the U.S. was precipitated by what's going on in Europe," said Chris Zaccarelli, chief investment officer for Charlotte-based Independent Advisor Alliance. "Fear has gripped the continent."
The Stoxx Europe 600 index retreated 3.8%. Germany's DAX, the benchmark for Europe's industrial powerhouse, dropped 4%.
The falls came a day after the Group of 20 major economies warned that the coronavirus outbreak poses a serious risk to the global economy. And within China, officials and economists are warning that an extended Chinese shutdown could cripple global manufacturing and cost the world up to $1 trillion in lost output.
The contagion, which has curtailed Chinese manufacturing, exports and consumption this year, is threatening to damp global growth as factories world-wide depend on a supply chain tethered to China for many intermediate and finished goods.
"Not only are Chinese industrial hubs in lockdown, and derailing global supply chains, you now have the virus spreading very close to industrial hubs in Europe," said Florian Hense, European economist at Berenberg Bank.
"Northern Italy, Switzerland, Southern Germany, and Austria form a big supranational industrial hub," Mr. Hense said. "Should a lockdown in small areas of Italy be widened, there would be far more significant disruption for manufactures like German car makers in Europe."
In South Korea, the benchmark Korea Composite Stock Price Index, or Kospi, closed down 3.9%. That was its biggest one-day fall since 2018, according to FactSet. South Korea on Sunday raised its infectious-disease alert to red -- the highest level -- for the first time since the H1N1 swine flu outbreak in 2009.
"This could serve as a 'wake-up' call for Japan and other Asian economies, which are vulnerable against the impact of the virus," said Ms. Yang. "This will also put the hosting of Tokyo Summer Olympic Games under scrutiny, as Japan now has the highest number of infections outside of China alongside an aging population."
Elsewhere in Asia, stock benchmarks in Hong Kong and Singapore fell 1.8% and 1.2%, respectively. In Australia the S&P/ASX 200 index declined 2.3%. Markets in Japan were closed Monday.
Write to Anna Isaac at firstname.lastname@example.org