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* Futures down: Dow 1.18%, S&P 1.41%, Nasdaq 1.61% (Adds comment, details, updates prices)
By Medha Singh
Feb 28 (Reuters) - U.S. stock indexes were set for another sharp fall at the open on Friday as the rapidly spreading coronavirus outbreak raised the alarm for a possible global recession.
Investors are reeling after virus fears wiped nearly $3 trillion off the combined market value of S&P 500 companies this week, with the index confirming its fastest correction in history in volatile trading on Thursday.
Even as the outbreak eases in China, investors have been rattled by the rapid spread of the disease in other countries, which now account for about three-quarters of new infections.
As the world prepares for a likely pandemic, an inversion of the U.S. Treasury yield curve deepened further in a clear sign of recession. All three main stock indexes are set to record their sharpest weekly drop since the global financial crisis in 2008.
“This selling is a bit extreme for something that we don’t know enough about,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.
“What I do know is that the coronavirus is not going to lead us into a financial crisis that is long lasting. It could put us in a technical recession but the real concern is does that recession cause the U.S. consumer to pare back on spending?”
At 8:48 a.m. ET, Dow e-minis were down 302 points, or 1.18%. S&P 500 e-minis were down 41.75 points, or 1.41% and Nasdaq 100 e-minis were down 135.25 points, or 1.61%.
While the magnitude of the economic damage from the containment measures, which have crippled supply chains and hit business investment, remains unclear, analysts have sharply downgraded their outlook for growth and corporate earnings.
Traders are now pricing in an interest rate cut by the Federal Reserve as soon as next month, but many have expressed doubts about how this would mitigate the impact of the outbreak.
“Lower interest rates will do next to nothing to counter a supply side shock like this one, and even the positive effects on demand are questionable if entire economies start going into lockdown,” said Marios Hadjikyriacos, investment analyst at online broker XM.
Adding to worries, the Commerce Department’s data on Friday showed U.S. consumer spending rose less than expected in January, a loss of momentum that could be exacerbated by the outbreak. (Reporting by Medha Singh in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty)