S&P 500, Dow dip as Buffett ditches airlines, China tensions flareS&P 500, Dow dip as Buffett ditches airlines, China tensions flare
FILE PHOTO: The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City

By Shreyashi Sanyal and Medha Singh

(Reuters) – The S&P 500 and Dow Jones dropped for the third session on Monday following a U.S.-China spat over the origins of the coronavirus outbreak and billionaire Warren Buffett’s Berkshire Hathaway’s move 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 7.8% and 10%, as Buffett said “the world has changed” for the aviation industry.

Berkshire’s <BRKa.N> move also shaved more than 4% off planemaker Boeing Co’s <BA.N> shares. The S&P 1500 airlines sub-index <.SPCOMAIR> plunged 8% and was on track for its worst day in more than a month.

Shares of the conglomerate fell 3% and weighed on the financials index <.SPSY> after it posted a record quarterly loss of nearly $50 billion.

Analysts said Buffett’s relatively bleak reading of the market had hit home with investors.

“The fact that he had sold airline stocks was perhaps a realization that he sees a slow recovery for the economy for a while at least,” said James Ragan, director of Wealth Management Research at D.A. Davidson in Seattle.

Nine of the major 11 S&P 500 sectors were trading lower, also pressured by comments from U.S. Secretary of State Mike Pompeo that there was “a significant amount of evidence” the coronavirus emerged from a Chinese laboratory. An editorial in China’s Global Times said he was “bluffing”.

All three major stock indexes have clawed back more than 11% in April, but the rally is likely to be tested in the coming weeks as investors trying to assess the pace of an economic recovery with states starting to emerge from lockdowns.

High-growth stocks such as Apple Inc <AAPL.O>, Microsoft Corp <MSFT.O> and Amazon.com Inc <AMZN.O>, seen less disrupted by the pandemic, kept the Nasdaq index <.IXIC> afloat.

“Market leadership has been concentrated in growth stocks deemed to be relatively immune to the COVID-19 virus,” said Marc Chaikin, founder of Chaikin Analytics in Philadelphia.

At 13:11 p.m. ET the Dow Jones Industrial Average <.DJI> was down 228.87 points, or 0.96%, at 23,494.82, the S&P 500 <.SPX> was down 16.72 points, or 0.59%, at 2,813.99 and the Nasdaq Composite <.IXIC> was up 3.41 points, or 0.04%, at 8,608.36.

Data on Monday showed new orders for U.S.-made goods fell more than expected in March and could sink further as the health crisis upends supply chains and exports.

With more than half of the S&P 500 companies having reported results so far, analysts now see first-quarter S&P 500 earnings falling 12.5% from a year earlier, and an even sharper 39% decline in the second quarter.

Tyson Foods Inc <TSN.N> tumbled 8.4% as the company said it would temporarily close plants as needed and forecast meat sales to fall in the second half of the year as shutdowns hammer restaurants and other food outlets.

Declining issues outnumbered advancers for a 2.19-to-1 ratio on the NYSE and for a 1.65-to-1 ratio on the Nasdaq.

The S&P index recorded no new 52-week high and three new lows, while the Nasdaq recorded 13 new highs and 11 new lows.

(Reporting by Shreyashi Sanyal and Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty, Shounak Dasgupta and Arun Koyyur)