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U.S. Stocks Fall on China Virus Fears

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01/21/2020 | 10:12am EST

By Steven Russolillo and Avantika Chilkoti

Global stocks dropped Tuesday on concerns over the rapid spread of a potentially deadly pneumonialike virus originating in central China.

The Dow Jones Industrial Average fell 0.2%, the S&P 500 lost 0.2% and the Nasdaq Composite dropped 0.3%. All three indexes pulled back from record levels.

Overseas, the pan-continental Stoxx Europe 600 index dropped 0.3%. The Shanghai Composite closed 1.4% lower in its biggest drop in over two months, while the Chinese yuan lost 0.6% against the dollar in offshore trading.

The newly identified virus has spread between humans, a leading Chinese health official said. That fueled concerns the disease could quickly be transmitted across Asia as millions of Chinese travel for the annual Lunar New Year holiday. The virus has already claimed six lives. A similar coronavirus led to the outbreak of severe acute respiratory syndrome, or SARS, in late 2002 in southern China, killing 774 people.

"The economic consequences could be extremely concerning," said Rajiv Biswas, chief economist for the Asia-Pacific region at IHS Markit. "China's international tourism has boomed, so the risks of a global SARS-like virus epidemic spreading globally have become even more severe."

Shares of companies that could more directly affected economically were mostly lower. Wynn Resorts lost 6%, Las Vegas Sands dropped 5.6%, and MGM Resorts fell 4.1%. Delta Air Lines fell 1.6%, American Airlines lost 2.5%, and United Airlines Holdings dropped 2.7%.

Apart from the Chinese yuan, other Asian currencies also fell against the U.S. dollar on fears that tourism and Asian economies could be hurt if there is a widespread outbreak of the virus. The South Korean won slid 0.7% against the U.S. dollar and the Taiwan dollar lost 0.2% against the greenback.

"Global asset markets have been pricing in this blue-sky scenario: there wasn't a cloud in the sky," said Cliff Tan, East Asian head of global markets research at Japanese bank MUFG. "Now we have a cloud."

Among the biggest losers was UBS Group, which retreated over 5% after the Swiss banking giant missed its key 2019 targets and lowered its guidance.

Hong Kong's Hang Seng benchmark was the worst performer among major Asian benchmarks, closing down 2.8% in its biggest decline in over five months. Adding to the gloom in Hong Kong, Moody's Investors Service downgraded the city's credit rating. The ratings firm blamed the government for failing to properly deal with seven months of social unrest, which has driven the economy into recession.

Within commodities, copper prices dropped 1.4%, putting the metal on track for the biggest fall in four months, as investors weighed the impact of the virus on China's economy and the typical slowdown in buying ahead of Lunar New Year holidays.

Brent crude, the global benchmark for oil, dropped 1.4% to $64.27 a barrel as the International Monetary Fund's decision to trim global growth forecasts led to speculation that demand for oil could drop. Concerns about supply disruptions in Libya from earlier in the week also abated.

Later in the day, a string of U.S. companies are scheduled to report earnings including Netflix and International Business Machines.

Caitlin Ostroff and Paul Vigna contributed to this article.

Write to Steven Russolillo at steven.russolillo@wsj.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. -2.42% 27.82 Delayed Quote.-3.00%
CHINA-SHANGHAI COMP 1.84% 3030.15 End-of-day quote.-1.18%
CRB COMMODITY INDEX 0.10% 195.01 End-of-day quote.0.00%
DELTA AIR LINES INC. -0.87% 57.87 Delayed Quote.-1.04%
DJ INDUSTRIAL -0.78% 28992.41 Delayed Quote.2.39%
HANG SENG -1.07% 27316.77 Real-time Quote.-3.10%
IHS MARKIT LTD. -1.72% 79.06 Delayed Quote.4.92%
LAS VEGAS SANDS CORP. -2.73% 65.6 Delayed Quote.-2.32%
LME COPPER CASH -0.27% 5730 End-of-day quote.-7.06%
LONDON BRENT OIL -1.13% 58.45 Delayed Quote.-10.42%
MGM RESORTS INTERNATIONAL -2.94% 31.39 Delayed Quote.-2.80%
NASDAQ 100 -1.88% 9446.687755 Delayed Quote.10.25%
NASDAQ COMP. -1.79% 9576.590101 Delayed Quote.8.67%
NETFLIX, INC. -1.54% 380.07 Delayed Quote.19.29%
S&P 500 -1.05% 3337.75 Delayed Quote.4.41%
S&P/CITIC 300 INDEX 0.00% 3612.89 Delayed Quote.1.72%
S&P/CITIC 50 INDEX 0.00% 3646.26 Delayed Quote.-2.43%
STOXX EUROPE 600 -0.49% 428.07 Delayed Quote.3.45%
STOXX EUROPE 600 NR -0.49% 925.44 Delayed Quote.3.62%
UBS GROUP -2.61% 12.685 Delayed Quote.6.54%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) -0.08% 7.0331 Delayed Quote.1.06%
WTI -0.28% 53.31 Delayed Quote.-12.39%
WYNN RESORTS -4.04% 127.95 Delayed Quote.-3.99%
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