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* Futures down: Dow 0.77%, S&P 0.78%, Nasdaq 0.70%
By Medha Singh
Feb 28 (Reuters) - U.S. stock index futures dropped on
Friday as a surge in coronavirus cases, which have already wiped
nearly $3 trillion off stocks listed on the benchmark S&P 500
this week, triggered recession fears.
The index .SPX confirmed its fastest correction in history
in volatile trading in the previous session as it plunged more
than 10% from its record close just a week ago. The Dow .DJI
and Nasdaq .IXIC indexes also fell below those levels.
Even as the outbreak eases in China, investors have been
rattled by the rapid spread of the disease in other countries,
which now account for about three-quarters of new infections.
As the world prepares for a likely pandemic, an inversion of
the U.S. Treasury yield curve deepened further, sounding
recession alarms. All three main stock indexes are set to record
their sharpest weekly drop since the global financial crisis in
2008.
"Equities have moved in a linear fashion to price in worse
case outcomes, while the virus news flow is happening at a much
slower pace," said Art Hogan, chief market strategist at
National Securities in New York.
"The markets will get to their bottom long before the
negative news hits a crescendo."
At 7:38 a.m. ET, Dow e-minis 1YMcv1 were down 197 points,
or 0.77%. S&P 500 e-minis EScv1 were down 23 points, or 0.78%
and Nasdaq 100 e-minis NQcv1 were down 58.75 points, or 0.7%.
While the magnitude of the economic damage from the
containment measures, which have crippled supply chains and hit
business investment, remains unclear, analysts have sharply
downgraded their outlook for growth and corporate earnings.
Traders are now pricing in an interest rate cut by the
Federal Reserve as soon as next month, but many have expressed
doubts about how this would mitigate the impact of the outbreak.
"Lower interest rates will do next to nothing to counter a
supply side shock like this one, and even the positive effects
on demand are questionable if entire economies start going into
lockdown," said Marios Hadjikyriacos, investment analyst at
online broker XM.
Investors now await inflation data from the Commerce
Department on Friday, which is likely to show no
month-over-month change in the reading for core PCE index in
January. The reading, due at 8:30 a.m. ET, is the Fed's
preferred inflation measure.