S&P 500, Dow drop as Buffett ditches airlines, China tensions flare

(Reuters) – The S&P 500 and Dow Jones dropped for the third session on Monday following a U.S.-China dispute over the origins of the coronavirus outbreak and a move by billionaire Warren Buffett’s Berkshire Hathaway to dump stakes in major U.S. airlines.

Shares of Delta Air Lines Inc (DAL.N), American Airlines Group Inc (AAL.O), Southwest Airlines Co (LUV.N) and United Airlines Holdings Inc (UAL.O) fell between 7% and 10% and were among the biggest decliners on the S&P 500 after Buffett said “the world has changed” for the aviation industry.

Shares of Berkshire itself fell 3.0% and weighed on the S&P 500 after the conglomerate posted a record quarterly net loss of nearly $50 billion.

Buffett, whose comments are closely followed by investors, acknowledged at Berkshire’s annual meeting on Saturday that the global pandemic could significantly damage the economy and his investments.

“His narrative was relatively sober compared to his posture over the years,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “His comments were relatively cautious compared to what we have heard from him before.”

The Dow Jones Industrial Average .DJI fell 166.92 points, or 0.7%, to 23,556.77, and the S&P 500 .SPX lost 8.36 points, or 0.30%, to 2,822.35.

The Nasdaq Composite .IXIC added 33.18 points, or 0.39%, to 8,638.13, helped by gains in shares of Microsoft (MSFT.O) and Amazon (AMZN.O).

A massive rebound in stocks fueled by monetary and fiscal stimulus has paused in recent days as investors watch whether the number of states easing restrictions designed to stop the outbreak leads to a resurgence in virus cases.

A flare-up in U.S.-China tensions presents another challenge to the market. Secretary of State Mike Pompeo said on Sunday there was “a significant amount of evidence” that the new coronavirus emerged from a Chinese laboratory. An editorial in China’s Global Times said he was “bluffing”.

Investors are also digesting a difficult corporate results season. With more than half of S&P 500 companies reporting results so far, first-quarter earnings are expected to have fallen 12.5%, according to Refinitiv data.

“There is still a lot of uncertainty, a lot of companies scrapping guidance, and I think that is contributing to the murky environment for equities,” Roland said.

Shares of Tyson Foods Inc (TSN.N) tumbled 9.1% after the company said the coronavirus crisis will continue to idle U.S. meat plants and slow production as it reported lower-than-expected earnings and revenue for the quarter.

Data on Monday showed new orders for U.S.-made goods suffered a record decline in March and could sink further as disruptions from the coronavirus fracture supply chains and depress exports.

Declining issues outnumbered advancing ones on the NYSE by a 2.09-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and three new lows; the Nasdaq Composite recorded 13 new highs and 12 new lows.

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