Stocks sink on Wall Street as new daily virus cases surge
Stocks fell sharply on Wall Street Friday as the number of confirmed new coronavirus cases in the U.S. hit an all-time high, stoking worries among investors that the reopening of businesses they are banking on to revive the economy will be derailed.
The S&P 500 slid 2%, giving up all of its gains after a rally the day before. The selling caps a choppy week of trading on Wall Street as investors turn cautious in the face of a resurgent outbreak. The surge in the number of confirmed new coronavirus cases has undercut the optimism for an economic turnaround that helped drive a rebound for stocks for most of the past three months.
“That certainly calls into question how vigorous this recovery will be,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “We have to acknowledge there’s a high degree of uncertainty about how this is going to progress for the balance of the year.”
The Dow Jones Industrial Average was down 645 points, or 2.5%, to 25,096. The Nasdaq, which hit an all-time high earlier this week, slid 2%. Despite the pullback this week, the S&P 500 is still on pace for its best quarter since the fourth quarter of 1998.
Markets have been mostly rallying since April on hopes that U.S. states and regions around the world could continue to lift the spring lockdowns put in place to slow the spread of the coronavirus. The increase in cases casts doubt on expectations that the economy will continue to reopen and things can get back to normal sooner, rather than later.
The number of confirmed new coronavirus cases per day in the U.S. has hit an all-time high of 40,000, eclipsing the mark set during the deadliest stretch in late April. Deaths and hospitalizations have been rising in parts of the country, especially in the South and West. The resurgence in the virus has already led some governors to backtrack or at least pause the reopenings of their states.
“That has real implications for the pace where we can return to economic normalcy,” Northey said, adding that while some states are rolling back their reopening, it’s unlikely there will be a broad, nation-wide lockdown.
The stock market is likely to remain volatile as traders weigh the ups and downs in the trajectory of the pandemic.
“In large part, we’re going to see some of these fits and starts,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “It’s going to weigh on sentiment to some extent, but overall we think the economy is on the mend and the recovery is on its the way.”
Financial companies led the selling after the Federal Reserve ordered many of the nation’s biggest banks to suspend buybacks of their stock and cap dividend payments for several months.
Capital One Financial fell 7.8%, Goldman Sachs dropped 8.4% and JPMorgan was down 5.2%. The announcement came as part of the Fed’s annual “stress tests,” which showed that in a worst-case scenario involving the U.S. economy being ravaged by the pandemic, the banks would collectively lose roughly $700 billion.
Facebook slumped 6.9% as an advertising boycott aimed at pressuring the social networking giant into doing more to prevent racist and violent information from being shared on its service intensifies. On Thursday, Verizon announced it had joined the Facebook ad boycott, saying it has paused advertising on Facebook until the company “can create an acceptable solution that makes us comfortable.” Shares in Verizon were down 2.3%.
Traders also dumped shares in Nike after the athletic apparel maker reported a big loss as most of its stores were forced to close. The stock slid 7.1%.
Bond yields were mixed. The yield on the 10-year Treasury note slipped to 0.64% from 0.67%, another sign of caution in the market. The yield tends to move with investors’ expectations for the economy and inflation.
Concern that a pullback in the reopening of businesses could hamper demand for energy helped pull down oil prices Friday. Benchmark U.S. crude was down 0.8% to $38.43 a barrel. Brent crude, the price standard for international oils, was down 0.9% to $40.76 a barrel.
Major indexes in Europe were mostly lower. The DAX in Germany slid 0.7%, while the CAC 40 in France was down 0.2%. The FTSE 100 in London was up 0.2%. Markets in Asia finished mostly higher.
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