From Chipmakers to Casinos, Virus Angst Is Far-Ranging in Stocks

(Bloomberg) -- Chipmakers, cruise lines and casino operators are taking some of the hardest hits in U.S. stock trading Monday as investors flee companies with close links to China, where authorities are struggling to control the deadly coronavirus.

At least 80 people have died in mainland China from the virus, which started in the city of Wuhan, while confirmed cases have jumped to more than 2,700. Fears that China has failed to contain the virus, which has spread around the globe, roiled world markets, with the S&P 500 Index sliding the most since October. The market rout comes at the start of a week that’s jam-packed with earnings from companies like Apple Inc., Amazon.com Inc. and McDonald’s Corp.

“We’ve said that if the right catalyst came along, markets would be ripe for a pullback,” Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, told Bloomberg TV. “Valuations are extremely stretched right now and positioning is extremely euphoric.”

While the Chinese market remains closed for the Lunar New Year holiday, U.S. stocks with exposure to the country are tumbling amid growing concern the outbreak could turn into a pandemic that will squelch sales growth. Below are some of the sectors that are being hardest hit:

Chipmakers

• The Philadelphia Semiconductor Index fell as much as 4%, the most in five months.
• Wuhan is a major chip memory design and manufacturing site in China, and the outbreak will have an impact on memory chips and display makers, according to Susquehanna analyst Mehdi Hosseini. Universal Display, a developer and manufacturer of organic light emitting diodes, can be “adversely impacted by the inability to ship products to Wuhan,” Hosseini said. The stock fell as much as 8.1% Monday.
• The Wuhan travel ban could potentially disrupt manufacturing at Yangtze Memory Technologies Co., China’s leading producer of NAND flash memory chips, which could modestly benefit Western Digital Corp., Hosseini said.
• Analysts at Mizuho echoed the concern, saying that memory chip production “could be affected by the Coronavirus quarantine.”
• Apple fell as much as 3.9%, while American depositary receipts for supplier Taiwan Semiconductor Manufacturing dropped as much as 4.6%. Broadcom Inc. and Qualcomm Inc., which according to Bloomberg data rely on China for more than 35% of their revenue, each fell more than 3%. Among other Apple suppliers: IPG Photonics Corp. shed as much as 7.2%, Coherent Inc. was down as much as 5.6%, Skyworks Solutions Inc. dropped as much as 5%, and Cirrus Logic Inc. was down as much as 4.8%.
• Nvidia Corp. and NXP Semiconductors NV, which rely on China for at least one-fifth of their revenue, were among the worst performers in the Philadelphia Semiconductor Index, each down more than 5%.

Chinese Stocks Traded in the U.S.

• Alibaba Group Holding Ltd. fell as much as 6.7%, following last week’s 6% drop. Baidu Inc., JD.com Inc. fell at least 6%, while Tencent Holdings Ltd. dropped as much as 5.5%. Vipshop Holdings fell as much as 7.1%.
• Shanghai-based car manufacturer Nio Inc. was among companies hit the most, down as much as 18%. The iShares China Large-Cap exchange-traded fund fell as much as 6%.

Read more: Honda Evacuates, Starbucks Stores Shut: Virus Impact on Business

Casinos

• Wynn Resorts fell 10% after Bank of America downgraded the stock to neutral from buy because of growing concerns about the virus impact on the company’s Macau operations. Wynn’s casino resorts include the Wynn Macau and the Wynn Palace in Macau. The effect on Macau is worse than expected, Sanford C. Bernstein analyst Vitaly Umansky said in a note. “We now have data and anecdotal evidence and the Chinese New Year holiday period is shaking up to be the weakest Macau has seen in years,” Umansky said.
• Las Vegas Sands followed Wynn Resorts lower with a loss of as much as 10%. MGM Resorts International and Melco Resorts & Entertainment each fell down at least 6%.

Cruise Companies, Travel Agencies and Airlines

• Cruise-ship operators including Royal Caribbean and Carnival Corp. face risks to their earnings as trip cancellations and travel fears mount, analysts at UBS and Wedbush warned. Both stocks fell as much as 6%.
• James Hardiman, an analyst at Wedbush, said 2020 outlooks for online travel agencies are at risk. Trivago NV fell as much as 9.1% in U.S. trading, while Expedia slid as much as 4.7%.
• Airlines were hit, too. American Airlines fell as much as 8.2% following a 4% drop on Friday, while United Airlines slid as much as 6.5% to its lowest since July 2018.

Entertainment

• Shares of Imax Corp. fell as much as 4.5%. The impact of lost revenue from Chinese New Year will cost Imax at least $60 million in global box office revenue, analysts at MKM Partners wrote in a note on Monday.
• The temporary closure of Walt Disney Co.’s Shanghai Disneyland “comes at a lucrative and peak travel time to celebrate Lunar New Year,” JPMorgan analyst Alexia Quadrani wrote in a note. The stock slid as much as 3.6%.

Retail

• Estee Lauder Cos. fell as much as 7% after Oppenheimer analysts cut their recommendation to perform from outperform, saying the firm’s travel-retail segment may be “adversely impacted” until March or even longer because of the outbreak. Estee Lauder is the global consumer brand under Piper Sandler’s coverage universe that’s most at risk from a potential travel slowdown stemming from a coronavirus outbreak, analyst Erinn Murphy said last week. Peer Coty Inc. fell as much as 4.7%, following European cosmetics stocks lower.
• Canada Goose Holdings Inc., which is expanding in China, fell as much as 6% in New York.

Energy

• Energy companies slumped the most among all S&P 500 sectors on concern that the coronavirus will hit oil demand. Crude futures extended a five-day losing streak. Shares of HollyFrontier Corp., Concho Resources Inc., Schlumberger Ltd. and Halliburton Co. all fell as much as 5%.

--With assistance from Janet Freund, Gregory Calderone, Ryan Vlastelica and Esha Dey.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Richard Richtmyer, Catherine Larkin

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