Reopening fears spur late Wall Street slide
Worries about the downside of reopening the economy too soon are weighing on markets, and Wall Street fell Tuesday to its biggest loss since the start of the month.
The S&P 500 dropped 2.1 percent after spending much of the day drifting between small gains and losses, as investors debate whether the lifting of lockdowns across U.S. states and the world will drive an economic rebound or just more coronavirus infections.
The concerns were summed up in straightforward testimony from the top U.S. infectious diseases exofficer pert. Dr. Anthony Fauci told Congress that if the country reopens too soon, it could not only cause “some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery.”
The S&P 500 fell 60.20 points to 2,870.12, with the losses accelerating sharply in the last hour of trading. Stocks of companies whose profits are most closely tied to the strength of the economy had some of the market’s sharpest drops. Treasury yields also fell in a sign of increased caution.
The Dow Jones Industrial Average fell 457.21 points, or 1.9 percent, to 23,764.78, and the Nasdaq composite lost 189.79, or 2.1 percent, to 9,002.55.
Governments around the world and in some U.S. states have already begun gradually lifting restrictions on businesses, which were meant to slow the spread of the coronavirus outbreak but have also caused a severe recession. Expectations that growth will resume following the reopenings have helped drive the S&P 500 up 28 percent since late March.
But South Korea and other countries further ahead in removing restrictions have also seen small but notable increases in infections recently. That’s raising worries about possible second waves of infections.
“What we’re dealing with, both today and the last couple of weeks, is the optimism behind the reopening and asking: Are we going to be reopening too soon?” said Bill Northey, senior investment director at U.S. Bank Wealth Management.
The market will essentially be in wait-and-see mode for the next two to four weeks as investors gauge how the reopenings underway in several states are going, said Sal Bruno, chief investment at IndexIQ.
After dropping by roughly a third from February into late March on worries about the coming recession, the S&P 500 began recovering after the Federal Reserve and Capitol Hill flooded the economy with trillions of dollars in aid. The latest implementation of that came Tuesday, when the New York Fed began buying funds to support the corporate bond market.
A barrel of U.S. oil to be delivered in June rose 6.8 percent to $25.78 per barrel. Brent crude, the international standard, added 1.2 percent to $29.98.