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Wuhan Virus Fears Hit Market -- Are Stocks on Sale?

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Monday, January 27, 2020

Pre-market futures to start the week are down in a big way, as the China-borne coronavirus continues to add fatalities and infections over the weekend. This is not only fast becoming a crisis for human beings but for the Chinese economy, as well; this crisis occurred immediately prior to the Lunar New Year celebration (aka “Chinese New Year,” celebrated this past Saturday), which is by far the biggest travel period of the year in the country.

Because this coronavirus — which originated in the city of Wuhan, home to 11 million people — reportedly has an incubation period of 10 days to 2 weeks, efforts to contain the virus within the boundaries of Wuhan have partially failed. A reported 5 million people had already traveled from Wuhan for New Year’s prior to the currently imposed travel lockdown. As many as 50 million people from 16 surrounding cities, in addition to Wuhan, are not allowed to travel until the crisis abates.

This will no doubt have myriad negative effects on the Chinese economy, and, in turn, likely the world’s economy. Companies like Wynn Resorts (WYNN - Free Report) , down 8% ahead of the opening bell), with a large presence in Chinese entertainment destination Macau, as well as international travel companies like United Airlines (UAL - Free Report) , down 4% in the pre-market so far), are already seeing fallout. This is shaping up to be the biggest market sell-off in nearly 4 months. Currently, the Dow looks to open -450 points, the Nasdaq -170 and the S&P 500 -50 points.

So far, 81 confirmed deaths have resulted from this particular strain of coronavirus, while confirmed infections have climbed to 2862. This virus has by now reached 4 continents, with 5 known cases in the U.S. so far. What separates this crisis from, say, the SARS epidemic early this century, is how relatively quickly attention has been dedicated to quarantining and stifling the spread of the disease. Hopefully, this will be a short-term tragedy that stock markets are able to easily bounce back from, and will appear as a mere blip on a longer-term chart.

Thus, with a big sell-off awaiting traders at today’s opening bell, this may provide an opportunity for investors looking to buy into strong stocks at (temporarily?) reduced prices. Assisting this effort, as always, is the Zacks Rank #1 (Strong Buy) list. To access it, click here.

Mark Vickery
Senior Editor

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