Stocks Set for Biggest Drop Since October on Virus: Markets Wrap

(Bloomberg) -- The spread of a deadly respiratory virus rattled global markets, sending U.S. stocks lower and fueling demand for havens in government bonds and gold. Oil fell for a fourth day on concern the outbreak will dent economic growth.

The S&P 500 Index headed for its biggest drop since October amid reports that U.S. officials had confirmed two more cases of the illness, which originated in China and has also spread to Japan, South Korea and Singapore. Benchmark Treasury yields fell to a three-month low, while the dollar advanced for a second day.

Investors are exercising caution with stocks close to all-time highs, cognizant of the chance the respiratory virus migrates across the world and develops into a more devastating pandemic like the SARS illness that emerged 17 years ago. Officials in China boosted travel restrictions to cover 40 million people to contain the virus’s spread.

“The market has been reacting to headlines, but no one really has much information in terms of how bad it will get,” said Marvin Loh, senior global macro strategist at State Street (NYSE:STT). “It is affecting some of the growth expectations because ultimately that’s how it will manifest itself in the numbers. But it’s a moderate reaction at best -- it’s not like people are panicking.”

In company news, United Airlines Holdings Inc. and American Airlines (NASDAQ:AAL) Group Inc. each slid more than 4% on concern the virus will limit demand for air travel and tourism. Financial shares also sank, with Citigroup Inc (NYSE:C). down 2% as UBS warned the sector could be hurt by less credit-card spending and a decline in cross-border payments.

Health shares were among the worst performers Friday on growing fears that upcoming elections in the U.S. may prompt lawmakers to take action on the increasing cost of medicines in the U.S. Chipmakers were a rare bright spot after Intel Corp (NASDAQ:INTC). gave bullish revenue forecasts.

Elsewhere, the pound slipped for a second day versus the dollar, giving back some of its rally from earlier in the week.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 1% as of 1:49 p.m. New York time.
• The Stoxx Europe 600 Index added 0.9%.
• The MSCI AC Asia Pacific Index fell 0.1%.

• The Bloomberg Dollar Spot Index gained 0.2%.
• The British pound declined 0.3% to $1.3078.
• The euro fell 0.3% to $1.1027.
• The Japanese yen rose 0.2% to 109.32 per dollar.

• The yield on 10-year Treasuries fell five basis points 1.69%.
• Britain’s 10-year yield dipped three basis points to 0.56%.
• Germany’s 10-year yield fell three basis points to -0.34%.

• West Texas Intermediate crude declined 2.3% to $54.31 a barrel.
• Gold rose 0.4% to $1,578.20 an ounce.