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Stocks cap losing week as coronavirus fears resurface

CNBC logo CNBC 2/21/2020 Fred Imbert

Stocks ended lower Friday after the number of new coronavirus cases escalated, fueling worries over a pronounced global economic slowdown.

The Dow closed down 227 points, or 0.8%. The S&P 500 slid 1%, while the Nasdaq declined by 1.8%. The Dow had its worst daily performance since Feb. 7, while the S&P 500 posted its biggest one-day loss since Jan. 31. The Nasdaq recorded its worst session since Jan. 27.

Friday capped the market's first weekly losses in three weeks. The Nasdaq is down roughly 1.9% week to date. The Dow and S&P 500 are both down 1.5% for the week.

Microsoft and Nike fell more than 2% each to lead the Dow lower. The S&P 500 was pressured by a 2.6% drop in the tech sector. Facebook, Amazon, Netflix, Google-parent Alphabet and Apple all traded at least 1.7% lower to drag down the Nasdaq lower. In turn, money poured into U.S. bonds, pushing the 30-year rate to an all-time low.

China’s National Health Commission reported more than 75,000 confirmed cases and over 2,000 deaths on the mainland. More than 800 new cases were reported in China overnight. South Korea has also reported more than 200 cases.

“Even if the outbreak recedes, global growth is still set to fall to zero in the first quarter, before bouncing back over the remainder of the year,” Peter Berezin, a global strategist at BCA Research, said in a note. “Thus, a near-term hit to corporate earnings now looks unavoidable.”

The spread of the virus is already taking its toll on the Chinese economy. Data from the China Passenger Car Association showed auto sales plummeted by 92% in the first two weeks of February. Some U.S. companies, including Apple, have also warned this week about possible revenue headwinds due to the virus.

IHS Markit also said activity in the U.S. services sector hit its lowest level in more than six years, noting confidence was “subdued” to the coronavirus.

Traders plowed money into safe havens such as Treasurys and gold on Friday. The 30-year Treasury bond yield hit a record low, breaking below 1.9%. Yields move inversely to prices. Gold hit a fresh seven-year high, gaining 1.7% to $1,648.70 per ounce.

“This seems like a textbook defensive rotation,” said Frank Rybinski, a macro strategist at Aegon Asset Management. “You’re starting to see hard-dollar impacts for companies because their supply chains are being disrupted.”

U.S. stocks are coming off a negative session driven by a sudden midday sell-off which confounded traders and brought markets back from previous record highs. The Dow also notched its fourth decline in five sessions.

“Markets had their first real ‘shot across the bow’ in a few weeks time, with a sudden swift pullback to multi-day lows, which was severe enough to cause some rapid buying of volatility,” said Mark Newton, a managing member at Newton Advisors. “Yet breadth was never down that much even at the height of intraday losses, and ended up positive on the day.”

In corporate news, Deere shares popped more than 7% on quarterly earnings that beat analyst expectations. Dropbox soared more than 21% after it posted a profit that topped estimates.

CNBC’s Elliot Smith contributed to this report.

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