New coronavirus cases still rising in more than 20 U.S. states
U.S. stocks convulsed lower, plumbing intraday nadirs Thursday afternoon, amid signs of a resurgence of cases of the illness derived from the novel strain, and as investors digested Wednesday’s downbeat economic outlook from the Federal Reserve.
The market moves came even as the number of Americans filing for first-time jobless benefits declined again in the most recent week.
How are benchmarks performing?
The Dow US:DJIA was 1,866 points, 6.9%, Thursday, near 25,122, putting the index on track for its worst daily drop since mid March. Meanwhile, the S&P 500 US:SPX was trading 186 points, or 5.8%, lower near 3,005. The Nasdaq Composite US:COMP was down about 510 points, 5.1%, near 9,510, one day after charting a record above 10,000. The small-cap Russell 2000 US:RUT slid 104 points, or 7.1%, on pace for its worst one-day performance in 10 weeks.
What’s driving the market?
The number of U.S. coronavirus infections passed the two million mark and over 112,000 Americans have died, according to Johns Hopkins University. Despite fewer cases being recorded in some cities and states, the seven-day average of new cases over the last two weeks is still rising in more than 20 states, leading investors to worry about a second wave of the epidemic just as business activity is resuming.
President Trump announced he will resume holding election rallies with the first in Tulsa, Okla., on June 19 but he isn’t expected to require that attendees practice social distancing. Meanwhile, U.S. Treasury Secretary Steven Mnuchin said the U.S. shouldn’t shut down the economy again even if there is another surge in coronavirus cases.
The global case tally for the coronavirus climbed to 7.39 million on Thursday, according to data The death toll rose to 417,022.
Earlier, on Wednesday the Fed’s updated policy statement and projections indicate that it expects a 6.5% contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3%, well above the Fed’s estimate of the long-run rate forecast of 4.1%.
The central bank’s dour outlook has a lot to do with the stock market selloff, said Kristina Hooper, Invesco chief global market strategist.
“The stock market has almost had blinders on,” Hooper said in an interview. “More than one in three companies in the S&P 500 are dispensing with earnings guidance. So investors have anchored to data, which has been relatively positive about reopenings in various states, improvements in PMIs and the jobs report last week. In one fell swoop Jay Powell threw a lot of cold water on that narrative.”
Hooper thinks the market moves of this week aren’t necessarily the start of a sustained leg downward. “Typically the initial reaction to the Fed press conference is not the subsequent reaction. There needs to be some digestion by investors.”