AP dow sheds 1,800
Plummet comes as virus cases rise, deflating optimism
Stocks plummeted on Wall Street in sectors across the board Thursday as coronavirus cases in the U.S. increased, deflating optimism that the economy could recover quickly from its worst crisis in decades.
The Dow Jones Industrial Average sank more than 1,800 points and the S&P 500 dropped 5.9%, its worst day since mid-March, when stocks had a number of harrowing falls as the virus lockdowns began.
Many market watchers have been saying that a scorching comeback in the market since late March was overdone and didn’t reflect the dire state of the economy. The S&P 500 rallied 44.5% between late March and Monday.
The selling comes as coronavirus cases rise in the U.S., with some of the increase likely tied to the reopening of businesses and the lifting of stay-at-home orders. Cases are rising in nearly half the states, according to an Associated Press analysis.
Investor optimism for a speedy recovery in the economy was also dimmed by the Federal Reserve, which vowed Wednesday to keep rates low for the foreseeable future.
Those factors set the stage for the wave of selling Thursday, said Sal Bruno, chief investment officer at IndexIQ.
“It’s not surprising to see a bit of a sell-off, given the furious rally we’ve had coming out of the lows, despite the fact that the economy was not doing great,” Bruno said. “The fact that (the Fed) is talking about keeping interest rates this low through 2022 is a little eyeopening for a lot of folks.”
The S&P 500 dropped 188.04 points to 3,002.10, it’s biggest decline since March 16. The Dow skidded 1,861.82 points, or 6.9%, to 25,128.17. The Nasdaq composite, which rose above 10,000 for the first time a day earlier, lost 527.62 points, or 5.3%, to 9,492.73.
The price of oil also dropped 8.2% as investors again worried that a slumping economy would need less energy.
Nearly all of the companies in the S&P 500 closed lower. Technology, financial, industrial and health care stocks accounted for a big slice of the market’s broad slide. Energy stocks were the biggest losers as crude oil prices fell sharply. Bond yields fell and the price of gold surged 1.1% as worried investors shifted money into safe-haven assets.
Investors are still waiting for more data to see whether the spike in COVID-19 cases are a sign of a possible second wave of the infection, said Charlie Ripley, senior investment strategist for Allianz Investment Management.
“We think the recovery is largely underway, but there is still some considerable uncertainty on the path we have ahead,” Ripley said. “If we see some more follow-on of people coming back to work and consumer sentiment picking up, that will be a positive sign for a faster recovery.”