The bullish sentiment of American Stocks is about to come to a halt with the news of coronavirus outbreak doing the rounds in the market. In the past few weeks, the market had been performing really well but now it is time when the market sees a downfall. Such a decline in the market is seen after 4 straight weeks of ending the market on high since December 2019. Investors have probably understood this pattern of the US Stock market when a streak of high gains and profits suddenly ends due to the various external threats; this time around the threat is from the Chinese coronavirus.
Since the news of the virus spreading to countries like Iran and Italy came into the market, the major indices futures show a huge 3% drop in the coming trading days. Last week, the S&P 500 started trading more than 22 times earnings while Nasdaq 100 was close to 30 times earnings. Equity traders have a lot to think about the global economy and supply chains leaving aside the huge human toll that this virus is currently having.
The world’s factory in China is facing a steep upheaval which will have an adverse impact on the global economy as the earnings will eventually decline. It is a “sell now, see what happens later” stage for every shareholder at this very moment unless China comes back into being post fighting the coronavirus outbreak. This is the time when investors will prefer to keep cash in hand rather than in the market because of the decline that is approaching shortly.
The US Stock market index futures tumbled down massively after the news of coronavirus outbreak and rebound in China as well as other countries hit the bay on late Friday. People are more worried after understanding the fact that the illness can spread rapidly and sack the entire global health and prosperity index. Contracts on the DOW Jones index fell by a sharp 2.2% while the Nasdaq 100 slipped by 2.4%.
As the virus hits Europe, the Stoxx Europe 600 Index fell by around 3.1% and miners and automakers are leading this major drop among other sectors. What had been a completely Asian situation until a couple of days back has now spread its wings to European and Middle East nations such as Italy and Turkey. This is finally spooking out investors globally who till now thought that it was a temporary situation!