US stocks continued a massive sell-off Tuesday, breaking more records as investors fled the stock market for the safety of US Treasury bonds amid new fears about the growing coronavirus outbreak.
Despite opening up slightly higher in the morning on some strong corporate earnings reports, all three major US stock indexes plunged in the first hour of trading and kept falling steadily throughout the day.
The Dow Jones industrial average dropped 879.44 points, or 3.1 percent, to 27,081.36 after losing more than 1,000 points on Monday in its worst single-day drop in two years. The blue-chip index has now shed more than 1,900 points in just two days.
The S&P 500 sank 3 percent, or 97.68 points, to 3,128.21, while the Nasdaq composite tumbled 2.8 percent, or 255.67 points, to a low of 8965.61.
Yields on US Treasury bonds also fell hard again Tuesday, indicating investors are still running to perceived safe havens as the coronavirus, which has now killed more than 2,700 people worldwide, continues to spread outside of China.
“People aren’t reacting to the economic reality, they’re reacting to the fear,” said Damien Bisserier, partner and co-founder of Advanced Research Investment Solutions. “People think there’s nowhere to hide, but we continue to hold treasuries and gold. I think bond yields are going to go even lower.”
The yield on the benchmark 10-year Treasury note slid almost 5 basis points to a new low of 1.328 percent, its lowest close ever. The 30-year Treasury yield was down about 3.3 basis points to 1.803 percent after hitting its own record low Monday.
“We’re in a pretty good panic mode right now,” said Jim Paulsen, chief investment strategist at the Minneapolis-based Leuthold Group. “We’re sort of extrapolating to the worst case pandemic fear.”
White House senior economic adviser Larry Kudlow went on CNBC to calm domestic fears of the outbreak. “We have contained this. I won’t say [it’s] airtight, but it’s pretty close to airtight,” he said.
But his comments were not echoed by the Centers for Disease Control and Prevention, which minutes earlier released a statement warning Americans that the potential coronavirus becomes a pandemic poses a very real threat to the US and that Americans should prepare for disruptions to everyday life as a result.
“The CDC announcement was big,” Bisserier said. “The issue for markets is that this is all incredibly disruptive.”
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