Stocks plunge on fears of virus resurgence
The stock market slid sharply Thursday, with the Dow Jones industrial average shedding 1,861.82 points, or 6.9 percent, as suddenly renewed fears about the coronavirus’s impact on the economy startled Wall Street and the White House.
President Donald Trump and his top economic aides fanned out quickly to try to beat back the growing concern. They assailed the Federal Reserve for its recent projection that the unemployment rate will remain elevated well into next year. The Trump administration also pushed back on the idea that it would allow the economy to shut down again in the face of rising cases.
Over three days, the Dow has lost roughly 9 percent. The index peaked in mid-February at 29,551 before falling sharply to 18,592 over more than a month. It had rebounded strongly before this week’s slide, and there was a sense Thursday that perhaps the stock market had come back too far, too fast, without the economic underpinnings to justify such a climb.
“The market had become more optimistic and more enamored over a V-shaped recovery in recent weeks,” said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. “Anything that would disrupt that view was a vulnerability. And that’s exactly what we’ve seen in the last day and a half. The potential for a second virus wave and another lockdown is a worry. And there is concern over a possible slower pace of recovery.”
The stock market has risen sharply since late March in part because of extraordinary assistance from the Fed and Congress to flood the U.S. economy with money in an attempt to arrest the downturn caused by the coronavirus pandemic. Trump follows the stock market closely and views it as a measure of his presidency’s success, and he had recently dubbed Fed Chairman Jerome Powell, whom he had derided, as the “most improved player.”
Trump turned on the Fed on Thursday after the stock market’s slide picked up in velocity. He tried to dispute Powell’s assertion Wednesday that the economy could take a long time to heal and need substantial government help.
“The Federal Reserve is wrong so often,” he tweeted. “I see the numbers also, and do MUCH better than they do. We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021.”
His top economic adviser, Larry Kudlow, during remarks in a Fox News interview, attacked the manner in which Powell spoke about the economy.
“I do think Mr. Powell could lighten up a little when he has these press offerings. You know, a smile now and then, a little bit of optimism, OK?” he said. “I’ll talk with him, and we’ll have some media training at some point.”
Trying to push back on fears that the White House might have to urge some businesses to close again, Treasury Secretary Steven Mnuchin on Thursday said there was very little chance that would ever happen.
“It’s my expectation we will make medical progress between now and the end of the year,” Mnuchin told reporters. “I don’t expect we will need to shut down the economy again. Could there be some rare extreme scenario that occurs that based upon medical advice the president does [shut down the economy]? I think that’s extremely unlikely.”
There are concrete signs that the U.S. economy has stabilized from the worst of the recession, but economists are split in terms of where it will go from here. The U.S. economy added 2.5 million jobs in May, the Labor Department said last week, but the unemployment rate remains higher than at any point since the Great Depression. There are also signs consumers are spending more as more businesses are reopening, but many remain closed or are open at only partial capacity, and some have no plans to reopen.