Stocks drop as early gains yield to virus worries
Wall Street careened through all the forces that have pushed and pulled it through the week, at first rising on Friday amid hope for the economy and then falling on worries about worsening coronavirus levels in some states, all before ending with modest losses.
The S&P 500 dropped 0.6%, a relatively small move, to cap its fourth weekly gain in the last five. But the market swung between a gain of 1.3% and a decline of 1%, another example of how uncertainty is the dominant force over Wall Street as investors weigh budding improvements in the economy against worsening infection levels in the South and West.
The Dow Jones industrial average dropped 208.64 points, or 0.8%, to 25,871.46 after earlier swinging from a gain of 371 points to a loss of 320 points. The Nasdaq composite inched up by 3.07 points, or less than 0.1%, to 9,946.12. The S&P 500 fell 17.60 points to 3,097.74.
Also exacerbating volatility was Friday’s simultaneous expiration of contracts for stock options and futures, an occurrence that can drive bouts of buying and selling and is known as “quadruple witching day.”
Early in the day, U.S. stocks appeared set to follow European and Asian markets higher and follow through on Wall Street’s momentum earlier in the week.
Stocks had rebounded from last week’s 4.8% drop in large part because of a report showing U.S. shoppers spent much more last month than economists expected. That followed up on encouraging data about the U.S. jobs market.
Economists at Bank of America now expect the U.S. economy to shrink 5.7% this year, a severe contraction but not as bad as their earlier forecast for an 8.1% plunge.
The Federal Reserve also reminded markets this week how much it’s doing to prop up the economy.
The central bank said early in the week that it will buy individual corporate bonds as part of its previously announced plan to support lending markets for big employers. Later in the week, the Fed’s chairman said it plans to continue to keep interest rates near zero.
It was huge efforts by the Fed, along with spending by Congress, that helped the stock market turn around in March from its nearly 34% plunge.
But markets took a sharp turn lower Friday afternoon after Apple said it would temporarily close 11 stores in Arizona, Florida and the Carolinas.
The worst-case scenario for investors is that more waves of coronavirus infections lead to additional business shutdowns. Even if widespread stay-at-home orders don’t resume, the fear is that shoppers may still shy away and that businesses may pull back on spending.
In another demonstration of how long the road back to normal will be, the Cruise Lines International Assn. said Friday that its members are volunteering not to sail any voyages from U.S. ports until Sept. 15.
Cruise operators had some of the sharpest losses, including a 6.9% drop for Royal Caribbean Cruises.
Other companies whose profits sorely need the economy to reopen were also weak. United Airlines fell 6.4%, Nordstrom lost 6.3% and mall owner Simon Property Group fell 5.4%.
The yield on the 10-year Treasury note held steady at 0.69%.
A barrel of U.S. crude oil for delivery in July rose 2.3% to settle at $39.75. Brent crude, the international standard, gained 1.6% to settle at $42.19 per barrel.