Moneybeat – Health fears create market woes


MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Signs of economic health had been powering a rally on Wall Street that’s been running for about a month and a half. But last week, concerns about human health stopped the rally.

The Dow Jones Industrials, the Standard & Poor’s 500, and the Nasdaq stock indexes lost an average of 1 percentage point on the week—with all eyes on China and a deadly coronavirus there that prompted a full-on quarantine of a major industrial center.

Wall Street was up and down last week: up after the World Health Organization opted not to declare the viral outbreak a global emergency; then after health officials confirmed a second case of the coronavirus in the United States, the markets dropped. On Saturday, with markets closed, came a third American case in Southern California, and in Toronto, the first Canadian case of that coronavirus.

REICHARD: Back in 2003, an outbreak in Asia of severe acute respiratory syndrome—SARS—caused up to $50 billion in economic losses over the course of six months. Add to the actual physical toll of illness and death, fear of disease. That tends to cause people to stop traveling, shopping, and eating out at restaurants, among other economic activities. Stocks in Hong Kong, for example, lost about 10 percent in just two months when SARS cases were accelerating.

EICHER: For a sense of scale, the U.S. government estimates that on average, storm damage from hurricanes causes as much economic loss each year as the SARS outbreak did a decade and a half ago. Still, SARS accounted for fewer than 800 deaths, yet each year the ordinary flu virus kills hundreds of thousands of people. What raises alarm when new diseases like the coronavirus appear is fear of the unknown: How deadly might it be? How quickly might it spread? And, crucially, when will it stop? That’s the uncertainty you’re seeing reflected in the global markets right now.

REICHARD: Last week, we told you that new home construction spiked in December to the highest level in more than a decade. Well, this week, we can tell you it’ll be awhile before the supply catches up with ordinary demand. Even though December home sales jumped 3.6 percent month-on-month and more than 10 percent year-on-year, the inventory of homes available is at a record low level. The National Association of Realtors says home supply is the lowest since the association started keeping these statistics back in 1982. Right now, the estimate is a three-month supply. But in a typically balanced market, it’d be six months. This tight market has pushed the median home sales price up to $275,000. Median means simply midpoint, that there’s an equal number of homes selling below that price as above it.

EICHER: The long-awaited trade agreement among the United States, Mexico, and Canada is about to become official, finally. The White House announced a signing ceremony for Wednesday, day after tomorrow. That same day, the Canadian government will unveil legislation to ratify the USMCA. 

And that is today’s Monday Moneybeat.


(Photo/Associated Press)

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