Stocks fell sharply in volatile trading Thursday as investors worried the coronavirus may be spreading in the U.S. A slew of corporate and analyst warnings on the virus dragged down the major averages, tipping them into correction territory.
The Dow Jones Industrial Average plummeted 1,190.95 points, or 4.4%, to close at 25,766.64. The S&P 500 slid 4.4% to 2,978.76 while the Nasdaq Composite dropped 4.6% to 8,566.48. The Dow had its worst day since February 2018 while the Nasdaq and S&P 500 posted its biggest one-day loss since August 2011.
It was also the Dow's biggest one-day point decline in history, surpassing Monday's 1,031-point drop. The S&P 500 also closed below 3,000 for the first time since last October.
"We're extremely cautious in the short term," said Tom Hainlin, global investment strategist at Ascent Private Capital Management. "No one really seems to be an expert on the coronavirus. We haven't seen anything like this really in our investing lifetimes."
Thursday's losses put the Dow, S&P 500 and Nasdaq in correction territory, which is defined on Wall Street as down more than 10% from their a recent high. It took the Dow just 10 sessions to tumble from its all-time high into a correction. The S&P 500 and Nasdaq set record highs last week. The Dow now sits more than 12% below its all-time high.
The Dow and S&P 500 were also on pace for their worst weekly performance since 2008. Through Thursday's close, the Dow was down more than 11% week to date while the S&P 500 had lost 10.8%.
The CDC confirmed on Wednesday evening the first U.S. coronavirus case of unknown origin in Northern California, indicating possible "community spread" of the disease. The patient had no travel history or contacts that would have put the person at risk, the CDC said. On Thursday, California Gov. Gavin Newsom said the state is monitoring 8,400 people for coronavirus.
Apple, Intel and Exxon Mobil were among the worst-performing Dow stocks Thursday, dropping at least 6% each. AMD and Nvidia fell 7.3% and 5.6%, respectively.
American Airlines dropped 7.7% while United Airlines slid 2.4%. Las Vegas Sands and MGM Resorts, meanwhile, fell 1.3% and 4.5%, respectively.
Trump press conference
President Donald Trump tried to assuage concerns over the outbreak on Wednesday night. At a White House news conference, he said the risk of coronavirus to people in the U.S. is still "very low" but added that the U.S. is going to "spend whatever's appropriate." Trump also put Vice President Mike Pence in charge of the U.S. response to the coronavirus and said markets should soon recover.
But worries over how the coronavirus will impact corporate profits and global economic growth overwhelmed the president's assurances. The stock market has been under pressure all week as the number of confirmed cases increased outside of China. South Korea has confirmed a total of more than 1,700 cases. More than 600 people have contracted the virus in Italy.
The outbreak has also led several companies to issue warnings about its earnings and revenues.
Microsoft said Wednesday it will not meet its revenue guidance for a key segment. It said its supply chain is "returning to normal operations at a slower pace than anticipated," which led the tech giant to cut its forecast for its personal computing division. Personal computing accounted for 36% of Microsoft's overall revenue during the previous quarter. Microsoft shares were down 7.1%. PayPal also issued a warning about its outlook.
Goldman's bearish call
"US companies will generate no earnings growth in 2020," David Kostin, Goldman Sachs' chief U.S. equity strategist, said in a note that further spooked the market on Thursday. "Our reduced profit forecasts reflect the severe decline in Chinese economic activity in 1Q, lower end-demand for US exporters, disruption to the supply chain for many US firms, a slowdown in US economic activity, and elevated business uncertainty."
The S&P 500 posted Thursday a six-day losing streak, its longest daily slide since August. The Dow also had a sixth consecutive loss, the 30-stock average's longest losing streak since 2018.
"As this week's selling has progressed, we have seen some evidence of increased caution on the part of investors," said Willie Delwiche, investment strategist at Baird. "Investors are shifting away from excessive optimism but there is still little evidence of fear overwhelming complacency. Bottoms are typically processes punctuated by climactic events and seeing breadth indicators stabilize would be an encouraging sign that such a process is underway."
Bond prices, in turn, have surged this week sending yields to historic lows.
The benchmark 10-year Treasury yield dipped below 1.25% on Thursday, hitting a record low. The 30-year bond rate is also trading at an all-time low. Yields move inversely to prices.
"We've hit a pocket of fear," said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. "This is a big deal. … If this flows into the U.S., we could be in trouble because, let's face it, the U.S. consumer is what's holding this thing together."
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