COVID-19 Leads US Stock Market into Correction Phase

[Asia Economy Reporter Song Hwajeong] As the novel coronavirus infection (COVID-19) spreads, the once-booming U.S. stock market has entered a correction phase. Experts suggest that it is necessary to observe the trends in disease control and response policies for the time being.

On the 28th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 25,409.36, down 357.28 points (1.39%) from the previous session. The S&P 500 index closed at 2,954.22, down 24.54 points (0.82%). However, the tech-heavy Nasdaq index ended the day slightly up by 0.89 points (0.01%) at 8,567.37.

The Dow fell 12.36% this week. The S&P 500 dropped 11.49%, and the Nasdaq declined 10.54%.

Jihoon Kim, a researcher at Samsung Securities, said, "On the 27th, the Dow posted the largest single-day point drop in history," adding, "Since the peak recorded in February, the S&P 500, Dow, and Nasdaq have each fallen more than 12%, entering a correction phase." Kim analyzed, "The number of confirmed cases on the U.S. mainland, which had been considered a relatively safe zone, has rapidly increased from 15 on the 20th to 60 on the 27th. California announced that it is monitoring the COVID-19 risk among at least 8,400 individuals with recent travel history to China, contributing to the index decline."

Growth rate slowdown and supply chain disruptions due to the disease spread are also lowering profit growth expectations. Kim explained, "As major institutions revise down their global economic growth forecasts, the sharp increase in confirmed cases in Asia and Europe is raising concerns about disruptions to the global supply chain, including the U.S. Profit growth expectations, the main driver of the stock market, are also being revised downward. The 2020 S&P 500 earnings per share (EPS) growth forecast, which exceeded 9% at the end of 2019, has been lowered to 7.4%. There is room for further adjustments depending on the disease spread."

Rather than joining the panic, it is advised to maintain expectations regarding disease control trends and policy responses. Kim said, "Given the many uncertainties, it is not an environment conducive to taking aggressive positions. For existing U.S. stockholders, patience to observe disease control trends and policy responses rather than joining the sell-off seems necessary. If a rebound phase after disease control materializes, the momentum for a rebound led by tech stocks, which have experienced large declines, will strengthen."

This content was produced with the assistance of AI translation services.