What happened

The market was in free fall on Monday, driven down by concerns that the coronavirus is expanding rapidly outside of China. Traders spared few stocks as they ran for the exit, driving down shares of a range of retailers including Michaels Companies (NASDAQ:MIK), Fossil Group (NASDAQ:FOSL), At Home (NYSE:HOME), and Guess? (NYSE:GES) by more than 10% apiece.

So what

The S&P 500 traded down more than 3% midafternoon on Monday, and a range of retailers that source products from Asia were down significantly more than the market averages. With the virus flaring up in South Korea and Italy over the weekend, investors are growing increasingly concerned that the outbreak will not be controlled quickly.

Three women with shopping bags and their arms around each other

Image source: Getty Images.

The stocks were also affected by growing concerns about countries that we have not yet heard from concerning the coronavirus, including Asian markets adjacent to China that retailers have increasingly been turning to as alternatives. With the virus spreading so quickly in places like Italy and South Korea, it is at least possible that it is also spreading in other parts of the world that have not yet reported, or don't have the same infrastructure to monitor potential cases.

Monday's declines continue a tough year for many retailers, with Fossil now off more than 40% in 2020 and Michaels now down more than 30%. The exception is At Home, which got a boost in January when it updated its guidance, and is expected to be among the beneficiaries of the recent Pier 1 Imports bankruptcy.

MIK Chart

Retailers YTD data by YCharts.

Now what

It is impossible to know how long the coronavirus will affect global supply chains and retailers, or how broad the crisis will become and how many markets the virus will reach. But the concerns, and the sell-offs, are understandable.

Retailers were already under pressure even before the coronavirus began to dominate headlines, and any virus-related economic slowdown is only going to exacerbate an already challenging situation for many of these companies. There's always a risk of throwing out the baby with the bathwater on days like this, but it's understandable that investors have little desire to remain invested in these shares while they watch how this growing crisis plays out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.