Worst drop since October, coronavirus fears grow, airlines fall

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Stocks with a large amount of exposure to the coronavirus epidemic accelerated losses on Friday, dragging down the major averages. American Airlines, Delta and United all suspended flights to and from China, sending their stocks down 3.5%, 2.4% and 3.7%, respectively. Casino companies that operate in Macau were also in the red, with Las Vegas Sands falling 1.9%, MGM Resorts dropping 1.5% and Wynn Resorts down 0.5%. Carnival fell 2.8%, Norwegian Cruise Line fell 2.2% and Royal Caribbean fell 2% with less than an hour left of trading. – Fitzgerald

With roughly one hour left of trading let in Friday’s session, the major averages were headed for steep losses that are wiping out the Dow and S&P 500’s gains for the month. The Dow is down more than 550 points, or nearly 2%. The S&P 500 has lost more than 1.5%. The Dow was headed for its worst day since August while the S&P 500 was on pace to post its biggest one-day fall since October. —Imbert

Oil fell 1.1% on Friday, capping off a week that saw prices slide nearly 5%. It was U.S. West Texas Intermediate’s fourth straight week of losses, and Friday was oil’s 8th negative session in 9. For the month WTI posted a drop of 15.5% — its worst month since May — and it’s now back in bear market territory. The coronavirus outbreak is the primary factor weighing on prices, as traders fear that a virus-induced economic slowdown could hit oil demand. —Stevens

Friday’s decline in the Dow now marks the fifth biggest point drop in the past year. The 30-stock index is last down 548 points, on pace for its worst day since August.— Li

The Cboe Market Volatility Index rose 3.6 points on Friday as stocks sold off. The index, often called the market’s “fear gauge,” measures the implied future volatility expected by options traders. Volatility was abnormally low during most of the final quarter of 2019 as the market rose. The index is now above 19 points for the first time since Oct. 10. —Pound

The Dow Jones Industrial Average was down about 2% in afternoon trading, or about 570 points, as coronavirus fears keep battering stocks. If the 30-stock average doesn’t regain some of these losses, it will be its worst daily performance since August. —Imbert

The Washington Post confirmed an earlier CNBC report that the White House could announce even tighter travel restrictions to and from China, including an outright ban. The Post, citing people familiar with the discussions, said the Trump administration could make such an announcement as soon as Friday afternoon in an effort to formalize its stance. Equities held near session lows around the report with the Dow down more than 500 points. —Franck

The sell-off Friday was worsening and headed for some notable milestones:

• Worst day for Dow and S&P 500 since October 2.
• Dow and S&P 500 both dip negative for January.
• Worst week for both Dow and S&P 500 in 6 months (since week ending August 2).
• Dow headed for lowest close since December 18, S&P since December 30. — Schacknow

New York Daily News updated its earlier reports to show that the New York City’s first coronavirus case is not confirmed. Dow rose slightly from its lows.— Li

The major averages hit their lows of the day as the New York Daily News reported New York City’s first coronavirus case. CNBC could not confirm the report. — Li

The Dow hit its session low, now down more than 500 points, as the concerns on the fast-spreading coronavirus escalated. The S&P 500 also turned red on the month, last down 1.6%.— Li

Stocks were down sharply in midday trading, with the S&P 500 and Dow dropping more than 1% each. The sell-off accelerated in midmorning after Delta and American Airlines announced they had suspended flights between China and the U.S. due to the coronavirus. The Dow also erased its gains for the month. Delta and American shares both fell more than 2%. Wynn Resorts and Las Vegas Sands dropped more than 1% each. —Imbert

This week’s market sell-off has sent one of the Wall Street’s biggest optimists heading in the other direction, at least for now. Perennial bull Tom Lee, head of research at Fundstrat Global Advisors, told clients that he doesn’t advise buying this dip, which has seen the market erase about all of its January gains. Lee said that “this does not feel like a reflexive 2%-3% drawdown that ‘needs to be bought’ but rather, this feels like the start of a broader correction. Hence, the character of the market is changing from the relentless buying since October, to one where we need to ‘wait for the initial bottom’ before becoming more aggressive.” Lee estimates the selling will stop somewhere between the S&P 500’s 100- and 200-day moving averages, respectively 3,111 and 3,011. Those two points represent respective drawdowns of 5% and 8% from Thursday’s close. Still, Lee said he remains bullish for the full year because of “economic tailwinds” that ultimately will push the market higher. – Cox

Gold prices have gained about 4% in January and are headed for its best month in five as concerns about an economic slowdown from the Chinese coronavirus pushed investors into the safe haven asset. The World Health Organization on Thursday declared the coronavirus outbreak a global emergency, causing Wall Street firms like Goldman Sachs to downgrade this quarter’s growth forecast. Spot gold rose 0.65% to $1,584.1 per ounce on Friday. —Fitzgerald

China-based Luckin Coffee plunged 14% in midday trading after Muddy Waters Research tweeted it’s betting against the stock in light of what it described as fraud and a “fundamentally broken business.” Noted short seller Carson Block, founder and manager of Muddy Waters, is known for turning profits by leveraging his aptitude for detecting underhanded business practices, especially in China. His firm rose to fame in 2011 after Muddy Waters accused Chinese forestry company Sino-Forest of fraud. The company filed for bankruptcy the following year. —Franck

The Dow crossed below its 50-day moving average, a technical level closely watched by traders, for the first time since Oct. 10th. —Francolla

Source: FactSet

The Dow is now down 400 points as investors start to worry about the financial impact of the coronavirus if travel to China is severely restricted in the first quarter. Apple is down more than 2%. -Melloy

Stocks with exposure to China travel continued to fall on Friday as the deadly coronavirus infection and death toll rise. Airlines got hammered after Delta and America Airlines said they are suspended all flights between the U.S. and China. Shares of Delta are down 1.5% Friday and down nearly 4% for the month. American Airlines dropped 3% and is down more than 6% this month and United Airlines ticked 2.4% lower, continuing its near 14% drop since the start of January. Southwest fell 1.4%. Casino companies that operate in Macao also fell on Friday. Las Vegas Sands fell 2%, MGM Resorts ticked 1.6% lower and Wynn Resorts dropped 1.4%. The companies are down 6%, 7.5% and 10%, respectively this month. Cruise lines also got hammered with Carnival down 1.4%, Norwegian Cruise Lines down 1.7% and Royal Caribbean Cruises down 1.3%. Cruise lines are continuing their declines for the month down 13%, 7% and 11%, respectively, this month. – Fitzgerald

The Dow fell to its low for the day after American Airlines joined Delta in suspending all U.S.-China flights due to the coronavirus. -Melloy

As the losses on Friday mount, the Dow has turned negative for January. With it down more than 1.1%, the average is now slightly in the red for the month. The S&P 500 is still up 0.8% for the month and year. – Melloy

Shares of IBM jumped more than 4% after the computer software company announced CEO Ginni Rometty will step down in April. Rometty, who has served at the helm of the company since 2012, will be replaced by Arvind Krishna. Shares of IBM are down more than 22% since Rometty became CEO; however, the company shifted the focus of its business to could services in that time. Krishna, 57, is one of IBM’s top executives, having joined the company in 1990. —Fitzgerald

The Dow is now down 300 points, with Chevron and Exxon Mobil leading the decline in the 30-stock average. Apple dropped 2%, weighing on the broad market.— Li

January’s consumer sentiment data from the University of Michigan’s Surveys of Consumers were stronger than estimated. The number came in at 99.8, up from 99.3 in December and topping Dow Jones’ expectations of 99.1. Stocks remained lower after the data release.— Li

Just five of the 30 Dow members are higher with IBM the highlight, up nearly 4%. Chevron is the worst performer, down more than 3%. Decliners are outpacing advancers on the Big Board by 2.5-to-1. — Melloy

The yield on the benchmark 10-year Treasury note fell to about 1.534% Friday, bringing its month-to-date decline to nearly 40 basis points, on pace for its biggest monthly plunge in five months. The 10-year yield also dipped below the three-month Treasury rate of 1.552%, inverting a key part of the yield curve. This part of the yield curve is closely watched by the Federal Reserve for signs of an economic downturn.— Li

The Chinese coronavirus that has infected about 10,000 people and killed more than 200 people worldwide, is expected to dent economic growth this quarter, according to Goldman Sachs. The investment bank said the spreading virus could take 0.4% out of the annualized growth rate in the first quarter. The virus, which the World Health Organization declared a global emergency on Thursday, is causing consumers to stay inside, businesses to close shops, and airlines to cancel flights. Overall, Goldman said it expects the virus to result in “only a small net drag” on U.S. full-year 2020 growth of roughly 0.05 percentage points. —Fitzgerald

The Dow Jones Industrial Average dropped about 200 points shortly after the open Friday and the S&P 500 lost 0.3%. The Dow is up just 0.4% for January, while the S&P 500 is up 1.3%. The Nasdaq Composite Index was the bright spot, clinging to the flat-line on Friday because of a 9% surge in Amazon, which brought its market value back above $1 trillion. –Melloy

The coronavirus pandemic could hit the already slowing China economy even harder, according to Citigroup. The firm cut its GDP estimate for this year, now expecting a growth rate of 5.5% compared to the previous outlook for 5.8%. “We expect the negative economic impact of 2019-nCoV to concentrate in the near term, before the virus is contained and the government starts to repair the economy,” economist Xiangrong Yu said. GDP is projected to dip as low as 4.8% in the first quarter then rebound as the damage from the virus ebbs. —Cox

• Evercore ISI downgraded World Wrestling Entertainment to in line from outperform.
• JPMorgan initiated Uber as overweight. (stock up 0.7%)
• Guggenheim upgraded PayPal to buy from neutral.
• Baird downgraded Amgen to underperform to neutral. (stock down 2.7%)
• Wells Fargo downgraded Sherwin-Williams to equal weight from overweight.
• Jefferies upgraded Deckers to buy from hold. (stock up 5%)

CNBC Pro subscribers can read more here. —Bloom

Shares of Word Wrestling Entertainment fell about 25% in premarket trading after the company announced that co-Presidents George Barrios and Michelle Wilson will immediately leave the company and vacate their board seats. Additionally, WWE lowered its full year 2019 forecast to the bottom of the range of its previous guidance, below Wall Street’s consensus according to FactSet. —Sheetz

Shares of Colgate-Palmolive rose nearly 5% in premarket trading after the company reported fourth-quarter earnings in-line with expectations, with revenue slightly above as well, according to FactSet. The consumer products company also forecast 2020 revenue would growth between 4% and 6%, above the 3.8% pace analysts expected. —Sheetz

Canaccord Genuity writes that the U.S. equity market is “uncomfortably neutral:” It’s caught between positives like stronger fourth-quarter earnings and an easy Fed in tandem with negatives like an unknown macro impact from the coronavirus and a surge in valuations over the last month. Chief Market Strategist Tony Dwyer writes the opposing forces make it hard to be too bearish and too bullish, forcing investors into a charged equilibrium. The brokerage downgraded its market view to neutral on Jan. 20 because of “the overbought conditions and excessive optimism.” —Franck

Amazon shares surged more than 10% in the premarket on the back of quarterly numbers that blew past analyst expectations. The company posted a profit of $6.47 per share on revenue of $87.44 billion. Analysts polled by Refinitiv expected earnings per share of $4.03 on revenue of $86.02 billion. Revenue from the cloud business were a key driver for Amazon. “AMZN mgmt checked all the boxes with its Q4’19 EPS report,” said UBS analyst Eric Sheridan. “In addition, against that backdrop, AMZN mgmt in no way left investors with the view that their global agenda to drive better performance for platform partners … still has a long runway ahead.” Friday’s surge would bring Amazon’s market cap back above $1 trillion, based on the share count from the company’s October 10-Q filing. Alphabet, Microsoft and Apple also have market caps of more than $1 trillion. —Imbert

U.S. stocks were headed for a mixed open on the last day of January as worries over the coronavirus lingered while Caterpillar raised a red flag about the global economy. Dow Jones Industrial Average futures pointed to a drop or more than 100 points at the open. Chinese authorities said the number of coronavirus deaths has risen above 200 while more than 9,000 cases have been confirmed. Caterpillar also contributed to the losses in Dow futures after its CEO warned about “global economic uncertainty” (see below). Amazon shares surged more than 10%, however, to curb some of those losses. In fact, those gains pushed the Nasdaq 100’s implied open higher. —Imbert

—With reporting by Michael Sheetz, Michael Bloom, Jeff Cox, John Melloy, Maggie Fitzgerald, Gina Francolla, Peter Schacknow, Jesse Pound, Pippa Stevens.