Stocks Fall as Dangerous Coronavirus Spreads

Stocks and oil prices tumbled on Monday, as the spread of a dangerous virus in China raised investor worries about the global economy, just as it was beginning to emerge from a cloud of uncertainty related to the trade war.

The sudden appearance of the coronavirus, which has killed at least 80 people in China and infected others around the globe, pierced a calm that had settled over financial markets in recent months.

The S&P 500 dropped more than 1.5 percent in early trading, which would be its worst loss of the year and the steepest fall since early October.

Stocks with close ties to the Chinese market or the travel industry — or both — bore the brunt of the selling. American Airlines fell more than 4 percent in early trading, and Wynn Resorts, which operates casinos in Macau, a special administrative region of China and a gambling haven for Chinese high rollers, tumbled more than 9 percent.

The selling followed declines of more than 2 percent for the major stock benchmarks in Europe. Tokyo’s benchmark Nikkei 225 index also sank 2 percent, while many other markets in Asia — including the Shanghai Stock Exchange — were closed for the Lunar New Year.

China extended the Lunar New Year holiday by three days until Feb. 2 in an effort to limit travel and contain the outbreak that started in the city of Wuhan. Nearly 3,000 people, mostly in China, have contracted the disease. Five cases have been confirmed in the United States.

Concerns about travel restrictions — the Chinese government has effectively sealed off Wuhan and other cities, affecting 56 million people — helped push down oil prices and shares of major oil companies. Brent crude, the international benchmark, slipped below $60 a barrel, its lowest since October.

The arrival of the outbreak at a crucial period for Chinese business could complicate official plans to reinvigorate growth in the world’s second-largest economy in the aftermath of the trade-war tensions of the last two years.

The country’s economy, trying to shrug off its worst slowdown in nearly three decades, is already hurting from the impact on travel and tourism. And consumer spending — which helps fuel the economy over the holiday period — could be dampened as more residents stay home.

The outbreak has China’s leaders under pressure, and some experts have expressed concerns have that the government was too slow to respond and could even make the situation worse.

The sheer size of the Chinese economy makes any upheaval there a serious factor in the pace of worldwide economic growth. Creeping doubts among investors have already helped drive down bond yields in recent weeks. And on Monday, the yield on the 10-year Treasury note, considered a gauge of investor expectations for economic growth and inflation, sank to 1.61 percent, the lowest level of the year.

But as long as the spread of the virus remains contained, the economic implications shouldn’t be dire for the United States.

The American economy is relatively insulated from trade, and the important consumer sector is showing signs of ongoing strength. Unemployment remains near 50-year lows and economic growth, while relatively slow, is steady. Inflation and interest rates are low, with signs that those low rates are finally starting filter through to the broader economy.

With rates on 30-year fixed mortgages below 4 percent, housing has recently picked up the pace. Sales of previously built homes are at their highest level since early 2018. Home builders are reporting strong demand for more affordable offerings.

On Monday, D.R. Horton — the largest American homebuilder, by house closings — reported better-than-expected earnings and revenue numbers for the first quarter. Lennar, the second-largest builder, reported similarly bright numbers earlier this month.

“We continue to see good demand and a limited supply of homes at affordable prices across our markets, and economic fundamentals and financing availability remain solid,” said Donald R. Horton, chairman of the board at D.R. Horton, in a statement announcing the company’s results.