The Econ-versation: Stock market outlook amid coronavirus outbreak

Silvia Buonocore, Senior Writer

Amid the coronavirus outbreak, Tuesday’s stock market closing reversed the meek outlook from days prior. While Monday marked the fifth consecutive day of decline for the Dow Jones Industrial Average with a sharp drop of 453.93 points (1.6 percent), Tuesday’s closing brought it up by 187.05 points.

Monday also saw a drop by 1.6 percent for the S&P 500, which has not seen an increase or decrease by more than one percent since October 2019. On Tuesday, the day closed with the S&P 500 up by 32.61 points, or 1.01 percent. Nasdaq Composite also fell on Tuesday by 175.60 points, or 1.9 percent, while on Monday it increased by 130.37 points, or 1.43 percent.

Investors have had a bright outlook as the U.S. stock market had been steadily increasing. With Chinese trade negotiations underway as well as the bottoming out of slowdowns in manufacturing, global trade market optimism has increased. Yet now the coronavirus poses a threat to global growth and has investors questioning their next moves.

The virus itself increases uncertainty in investment as the tourism industry, as well as exports, have seen declines in affected Asian countries, such as Japan. In particular, Chinese travel restrictions hurt shares in the tourism industry in China. Additionally, countries such as the United States caution against travel to China, impacting the airline industry. The price of oil dropped as well since the virus lowers the demand for fuel.

Currently, the coronavirus shows no sign of slowing down. From Monday to Tuesday, the number of people infected by the virus jumped from 2,835 to over 4,000. The death toll has also topped 130 with 17 additional countries — including Hong Kong, Japan, the United States, Germany and Australia — reporting cases.

With the outbreak of the coronavirus being very recent, it is difficult to ascertain an accurate prediction regarding its impact on global growth. While the forthcoming trends of the stock market remain uncertain, investors are considering how to move forward.

Monday’s drop in the stock market cannot be solely attributed to the coronavirus outbreak as there are countless variables in the economy that can cause unexpected downturns. The coronavirus outbreak will likely remain a key variable for investors to follow, as will future decisions by the Fed, the trade war with China, and global growth.

This information was first reported by The Wall Street Journal and The New York Times.

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