FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon
May 4, 2020
By Shreyashi Sanyal and Medha Singh
(Reuters) – U.S. stocks were set to fall on Monday as a U.S.-Chinese spat about the origins of the coronavirus outbreak worsened while billionaire Warren Buffett’s admission he had dumped his airline shares crushed major U.S. carriers.
Delta Air Lines <DAL.N>, American Airlines Co <AAL.O>, Southwest Airlines Co <LUV.N> and United Airlines <UAL.O> fell between 9% and 11% in premarket, after Berkshire Hathaway <BRKa.N> chief Buffett told reporters of the move over the weekend, saying “the world has changed” for the industry.
The comments, and fall in airline operators, also shaved more than 4.7% off planemaker Boeing Co’s <BA.N> shares.
Berkshire itself posted a record loss of nearly $50 billion and Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, 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.
On China, U.S. Secretary of State Mike Pompeo said there was “a significant amount of evidence” that the coronavirus emerged from a Chinese laboratory. An editorial in China’s Global Times said Pompeo was “bluffing”.
The statements follow a grim start to May for Wall Street last week as President Donald Trump revived the threat of new tariffs against China in response to the COVID-19 pandemic.
“When you think how nervous markets got about the U.S.-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,” said Jim Reid, a strategist at Deutsche Bank.
The S&P 500 index’s <.SPX> 29% recovery from its March lows stands to be tested as investors weigh renewed U.S.-China tensions and the economic damage of the health crisis.
At 8:51 a.m. ET, Dow e-minis <1YMcv1> were down 225 points, or 0.95%, S&P 500 e-minis <EScv1> were down 18.5 points, or 0.66% and Nasdaq 100 e-minis <NQcv1> were down 52.5 points, or 0.60%.
Investors are also awaiting factory orders data for March, which is expected to show a sharp decline.
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% from a year ago, and an even sharper 37.8% decline for the second quarter.
Tyson Foods Inc <TSN.N> tumbled 7.3% 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.
(Reporting by Shreyashi Sanyal and Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty)
