Monday, February 24, 2020

Dow Drops 1,000+ Points: Don't Panic

The Dow Jones Industrial Average dropped by more than 1,000 points for just the third time in its long history. Investors shouldn’t care about the points though. The percentage drop, while painful, shows this is far from a market panic.

Monday, of course, was a bad day for U.S. investors. There is no ducking that fact. The spread of the coronavirus outside of China spooked all investors.

Also see:  Investors Just Turned Gloomy About Stocks. What to Watch for Now.

Europe’s FTSE 100 Index dropped 3.3%. Hong Kong’s Hang Seng Index fell 1.8%. The Dow dropped 3.6%. The S&P 500 fell 3.4%. And the Nasdaq Composite dropped 3.7%.

The Dow’s 1,032 point decline was the third-largest point drop ever. That sounds ominous, but it isn’t all that bad, historically speaking.

Point drops make headlines, but percentage drops are what investors focus on. Looking ahead, the ability to contain and control the spread of the virus will determine the near-term direction of the Dow.

First- and second-quarter economic activity will likely be impacted by the virus. China, the world’s second-largest economy, isn’t close to running at 100%. That will hurt corporate earnings world-wide. But economic activity should bounce back, as long as the virus spread can be controlled.

Containment isn’t a forecast. It’s a hope. And that’s what all investors, and health-care professionals, would like to see.

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