(Updates prices, adds commentary)
* All S&P sectors in the red, energy falls most
* Treasury yields hit record low
* Indexes down: Dow 3.17%, S&P 3.03%, Nasdaq 2.76%
By Sinéad Carew
NEW YORK, Feb 25 (Reuters) - Wall Street's three major stock
indexes fell 3% on Tuesday as the coronavirus spread further
around the world and investors clamored for safety a day after
the S&P 500's .SPX and the Dow Industrials' .DJI biggest
daily declines in two years.
After U.S. stocks started the session with an attempt to
rebound, they were quickly rebuffed and losses deepened as the
day wore on and U.S. 10-year Treasury yields hit a record low on
strong demand for safer bets.
Strategists struggled to estimate the economic impact of the
virus as it spread to Spain and dozens of countries from South
Korea to Italy accelerated emergency measures. The U.S. Centers for Disease Control and Prevention said
Americans should prepare for possible community spread of
coronavirus. Earlier in the day, Iran's virus death toll rose to
16, the highest outside China. It did not help matters when the Associated Press reported https://apnews.com/58043910be7bdc6818344bdee2096bc2
that a senior member of the International Olympic Committee
said organizers are more likely to cancel the 2020 Olympics than
to postpone or move it if the coronavirus makes it too dangerous
to hold in Tokyo.
As a result the S&P was on track for its biggest 2-day
percentage drop since August 2015. Fears of a pandemic had
knocked off more than 3% on Monday and erasing the S&P 500 and
the Dow's gains for the year-to-date.
"People are pulled to the sidelines and there's a
re-evaluation of risks. They're taking a wait and see approach
because nobody knows how to accurately estimate the potential
near term economic impact of coronavirus," said Carol Schleif,
Deputy Chief Investment Officer, Abbot Downing in Minneapolis.
"Markets abhor a vacuum. They hate not knowing so people are
waiting to see, to give it a few days to settle out."
At 2:36 p.m. ET, the Dow Jones Industrial Average .DJI was
down 886.23 points, or 3.17%, to 27,074.57, the S&P 500 .SPX
lost 97.75 points, or 3.03%, to 3,128.14 and the Nasdaq
Composite .IXIC dropped 254.49 points, or 2.76%, to 8,966.79.
The NYSE Arca Airline index was down almost 5% on track for
its biggest four-day decline since October 2011. Travel stocks
such as Tripadvisor TRIP.O , down 5.7%, and Norweigian Cruise
Line Holdings NCLH.K , down 6.9%.
"When people react to it because they don't travel or go to
restaurants or go shopping, that'll have an immediate impact on
the economy. It depends how long it goes and how wide the
spread," said Randy Frederick, vice president of trading and
derivatives for Charles Schwab in Austin, Texas.
The Cboe Volatility Index .VIX , known as Wall Street's
fear gauge, went above 30, for the first time since December
2018.
Only ten S&P stocks were in positive territory while all of
the S&P's 11 industry sectors were declining on Tuesday though
defensive industries such as consumer staples .SPLRCS , down
1.7%, fell the least while energy .SPNY was the biggest loser
with a more than 4% dip as oil prices tumbles.
Last week, positive fourth-quarter corporate earnings and
hopes of limited damage from the virus outbreak had pushed Wall
Street to record highs.
Some investors had been betting that central banks like the
U.S. Federal Reserve would counter economic weakness resulting
from the virus with support such as interest rate cuts. But
worries about supply chain disruption curbed this confidence.
"The markets are also coming around to this idea that when
it's a problem with the supply side, the central banks are not
equipped to deal with these kind of events," said Seema Shah,
chief investment strategist at Principal Global Investors in
London.
Department store operator Macy's Inc M.N fell 4% despite
reporting a smaller-than-expected drop in quarterly same-store
sales. Mastercard Inc MA.N shares fell 7%, putting it among the
S&P's biggest percentage decliners. Earlier it announced Chief
Executive Ajay Banga would step down at the start of the next
year and be replaced by products head Michael Miebach.
HP Inc HPQ.N pared earlier gains but was still up 4%,
providing one of the biggest boosts to the S&P, after saying it
would step up efforts to slash costs and buy back stock, as it
sought investor support to defend against a $35 billion takeover
offer from U.S. printer maker Xerox Holdings Corp XRX.N .
Declining issues outnumbered advancing ones on the NYSE by a
7.55-to-1 ratio; on Nasdaq, a 6.46-to-1 ratio favored decliners.
The S&P 500 posted 4 new 52-week highs and 41 new lows; the
Nasdaq Composite recorded 25 new highs and 195 new lows.