The S&P 500 and Dow Jones indexes have retreated following a US-China spat about the origins of the coronavirus outbreak, while major carriers slumped after billionaire Warren Buffett’s Berkshire Hathaway dumped its stakes in the sector.
Delta Air Lines, American Airlines, Southwest Airlines and United Airlines fell between 6.7 per cent and 8.4 per cent, after Buffett told reporters of the move over the weekend, saying “the world has changed” for the industry.
Berkshire’s announcement also shaved more than 1.9 per cent off planemaker Boeing’s shares.
The S&P 1500 airlines sub-index plunged 5.1 per cent and was on track for its worst day in more than a month on Monday.
Berkshire itself posted a record loss of nearly $US50 billion, sending its shares down two per cent and weighing heavily on the financials sector.
Vice president of trading and derivatives for Charles Schwab in Austin, Randy Frederick, said Buffett’s relatively bleak reading of the market had hit home with investors.
“I did not get the sense that he sees an enormous amount of opportunity out there right now, but is instead holding up a very high level of cash,” he said.
Nine of the major 11 S&P 500 sectors were trading lower, also pressured by comments from US Secretary of State Mike Pompeo that there was “a significant amount of evidence” the new coronavirus emerged from a Chinese laboratory.
An editorial in China’s Global Times said he was “bluffing”.
All three major stock indexes clawed back more than 11 per cent in April, but the rally is likely to be tested in the coming weeks with investors trying to gauge the pace of an economic recovery as states start emerging from lockdowns.
Data on Monday showed new orders for US-made goods fell more than expected in March and could sink further as the health crisis upends supply chains and exports.
Deutsche Bank strategist Jim Reid said tensions between the US and China have affected markets before, but the latest spat could indicate something more serious.
“When you think how nervous markets got about the US-China trade war then if this theme continues you can’t help thinking that the end game is far worse than it would be from a simple trade war,” he said.
At 10.18am local time on Monday the Dow Jones Industrial Average was down 126.91 points, or 0.53 per cent, at 23,596.78 and the S&P 500 was down 4.17 points, or 0.15 per cent, at 2826.54. However, the Nasdaq Composite was up 54.43 points, or 0.63 per cent, at 8659.38.
With more than half of the S&P 500 companies having reported earnings so far, analysts now see first-quarter S&P 500 earnings falling 12.7 per cent from a year ago, and an even sharper 37.8 per cent decline for the second quarter.
Tyson Foods tumbled 7.5 per cent as the company said it would temporarily close plants as needed and expects meat sales to fall in the second half of this year as shutdowns hammer restaurants and other food outlets.
Declining issues nearly matched advancers on the NYSE and the Nasdaq.
The S&P index recorded no new 52-week high and three new lows, while the Nasdaq recorded 11 new highs and eight new lows.