MARY LOUISE KELLY, HOST:
Coronavirus contagion hit the U.S. stock market today hard. The Dow Jones Industrial Average tumbled more than a thousand points. That's more than 3.5%. Investors are spooked by the growing number of infections outside China and the possible economic costs if the epidemic spreads. Clusters of coronavirus have been diagnosed in South Korea, in Italy and in Iran. NPR's Scott Horsley reports.
SCOTT HORSLEY, BYLINE: Up until now, the U.S. markets had seemed largely immune to coronavirus shocks, but not anymore. Investors were rattled by a spike in the number of cases beyond China's borders. Italy went from just three confirmed cases last week to 124. Italian authorities have now sealed off some of the hardest hit towns near the country's business capital of Milan. They also canceled soccer matches and the last two days of Carnival in Venice. Jay Bryson of Wells Fargo Securities says that may not be enough.
JAY BRYSON: Think about Europe - all right? - it's very open borders. And if people are infected in Italy, it could very well spread to other European countries.
HORSLEY: That's the last thing Europe's already slow-growing economy needs. Diane Swonk, who is chief economist at Grant Thornton, says as other countries work to control the virus, it's likely to further dampen economic activity.
DIANE SWONK: Parts of Korea where they're, you know, telling people to stay in - they're shutting down schools and institutions and plants. It's the same thing in northern Italy now. Parts of northern Italy, they're actually canceling conferences and telling people to stay in.
HORSLEY: Swonk was attending a conference of business economists here in Washington, where the spread of the coronavirus and the resulting stock market plunge were very much on people's minds.
SWONK: This is not a health pandemic yet, but it's becoming rapidly an economic pandemic.
HORSLEY: Some U.S. companies were already feeling the effects of China's massive quarantines, and the spread of the virus will only amplify that. Like China, South Korea is a major exporter, supplying the U.S. with nearly $80 billion worth of goods last year. Bryson says some of those exports are finished products, but others are components used by American manufacturers of electronics, computers and cars.
BRYSON: We import a fair amount of auto products from South Korea. And if that country were to shut down for any reasonable length of time, then you could have supply chain repercussions here in the auto industry in the United States.
HORSLEY: Ford shares were down more than 4% today. Apple shares lost close to 5%. Many forecasters had been expecting a rapid rebound from the economic pain of the coronavirus outbreak, but Swonk now worries it could take longer. With the virus still spreading, she warns businesses, consumers and tourists could make lasting changes in their sourcing, shopping and travelling plans.
SWONK: Combating the outbreak is actually feeding into the fears that people have out there, which is a tax on the global economy itself.
HORSLEY: Numerous business meetings and trade shows in Europe and Asia have already been canceled. That has an immediate toll on airlines and hotels but also a more lingering cost in deals that don't get done. For shoppers and travelers within this country, the fear factor remains fairly muted. Today there have been just 35 confirmed cases of coronavirus in the United States, and only two of those were contracted here.
DAVID KOTOK: So far, in North America, there's been a mild response. People don't walk around wearing masks. They haven't canceled events yet.
HORSLEY: David Kotok is chief investment officer at Cumberland Advisors. He's been saying for weeks that the stock market was underestimating the risk of coronavirus. Today he thinks the pendulum may have swung the other way.
KOTOK: One has to now say, is the market now going to extreme? Is it going to panic?
HORSLEY: Kotok is still cautious about the virus itself. He's the rare person in Florida who actually does wear one of those protective face masks these days. He's bolder, though, about the financial contagion. On a day the Dow was losing more than a thousand points, Kotok was buying stocks.
Scott Horsley, NPR News, Washington.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.