Markets tumble as California declares coronavirus emergency

COVID-19: California declares state of emergency following 1st coronavirus death
The ongoing concerns about the COVID-19 coronavirus has prompted the Bank of Canada to cut its key rate. Catherine Urquhart has the details, and whether there might be more cuts to come.

U.S. stock markets dropped more than 2% on Thursday as the swift spread of the coronavirus in the United States led California to declare an emergency, while airline stocks were hammered by crippled travel demand.

Down almost 12% last week – its worst since the 2008 financial crisis – the S&P 500 had recovered some poise as Joe Biden’s surge in the Democratic primaries distracted traders from the widening impact of the virus.

COVID-19 coronavirus concerns spark Bank of Canada rate cut
COVID-19 coronavirus concerns spark Bank of Canada rate cut

The benchmark index, however, is still about 7.5% below its record close on Feb. 19 and fears about the economic fallout remain at the forefront of investors’ minds.

The U.S. death toll from the outbreak rose to 11 on Thursday and California reported the first fatality outside Washington state, a day after lawmakers approved an $8.3 billion bill to combat the outbreak.

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In Toronto, the S&P/TSX composite index was down 217 points, or 1.3%, to 16,562 at 10:33 a.m. ET.

The CBOE Volatility index, Wall Street’s fear gauge, jumped 4.61 points to 36.63.

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READ MORE: Canadian banks lower lending rates after Bank of Canada rate cut

“Volatility is the norm right now as we ascertain how much economic damage is going to be done in the wake of the coronavirus epidemic,” said Art Hogan, chief market strategist at National Securities in New York.

U.S. airline Southwest slipped 4.3% after issuing a revenue warning as the outbreak crushes passenger numbers, while United Airlines and JetBlue Airways cut flights and implemented cost controls.

The International Air Transport Association also flagged a potential $113 billion hit to global airline revenue, sending the S&P 1500 airlines index down down 5.7%.

Cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line Holdings sunk between 7.9% and 10.6% as health officials screened people on a cruise line linked to the death in California.

How COVID-19 may impact your pocketbook
How COVID-19 may impact your pocketbook

At 9:48 a.m. ET, the Dow Jones Industrial Average was down 710.78 points, or 2.62%, at 26,380.08 and the S&P 500 was down 76.15 points, or 2.43%, at 3,053.97. The Nasdaq Composite was down 191.55 points, or 2.12%, at 8,826.54.

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All of the major S&P sectors were in the red with technology stocks weighing the most on the benchmark index.

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The rate-sensitive bank sub-sector dropped 4.6%, while the broader financial sector slipped 3.7%.

Traders are betting on more monetary easing after an emergency interest rate cut by the Federal Reserve earlier this week, further pressuring U.S. Treasury yields.

The Bank of Canada fully matched the Fed’s cut by lowering the target of its own trend-setting interest rate by half a percentage point, from 1.75% to 1.25%, on Wednesday.

HP Inc dipped 0.6% as the personal computer maker rejected a raised takeover bid of about $35 billion from Xerox Holdings Corp.

Declining issues outnumbered advancers for a 9.21-to-1 ratio on the NYSE and a 4.84-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and 39 new lows, while the Nasdaq recorded six new highs and 105 new lows.

— With files from Erica Alini at Global News