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Dow Plunges 710 on Virus Worries, Grim Economic Forecast

Dow Plunges 710 on Virus Worries, Grim Economic Forecast

Wednesday, 24 June 2020 04:08 PM

Wall Street's three major indexes on Wednesday suffered their biggest daily percentage drop in almost two weeks as a surge in U.S. coronavirus cases intensified fears of another round of government lockdowns and worsening economic damage.

Nasdaq, which had registered its fifth record closing high on Tuesday, snapped an eight-day wining streak, which was its longest since December 2019.

The session marked the biggest percentage decline for all three indexes, including a 2.6% drop for the S&P 500, since June 11 when the S&P fell 5.89%.

The United States has recorded the second-largest rise in infections since the health crisis began, with a flare-up of cases in states where restrictions meant to contain the disease were lifted early.

The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must self-quarantine for 14 days on arrival.

"Today was finally the day markets came to terms with the fact that increasing COVID-19 cases could mean a slower recovery in the economy," said Art Hogan, chief market strategist at National Securities in New York.

The pandemic appeared to be causing wider and deeper damage to economic activity than first thought. The IMF said it now expects global output to shrink by 4.9%, compared with a 3.0% contraction predicted in April.

Advanced economies have been particularly hard hit, with U.S. output now expected to shrink 8.0%, more than two percentage points worse than the April forecast.

Shares of U.S. airlines, resorts and cruise operators slumped as travel was hit hard by lockdowns. Royal Caribbean Cruises Ltd, Norwegian Cruise Line Holdings Ltd and Wynn Resorts all tumbled along with the NYSE Arca Airline index.

Cruise operator Carnival Corp fell 11% as it also faced a Standard & Poor's credit rating downgrade for its bonds to junk status.

The Dow Jones Industrial Average fell 710.16 points, or 2.72%, to 25,445.94, the S&P 500 lost 80.96 points, or 2.59%, to 3,050.33 and the Nasdaq Composite dropped 222.20 points, or 2.19%, to 9,909.17.

The S&P 500 finished the session about 10% under its Feb. 19 closing record high while the Dow Jones Industrials was about 14% from its Feb. 12 record close.

Wall Street's fear gauge, the CBOE volatility index, closed 2.47 points higher at 33.84.

Before Wednesday's sell-off, a slate of better-than-feared economic reports, easing lockdowns and massive stimulus measures had powered the Nasdaq to an all-time high and put the benchmark S&P 500 on track for its best quarterly performance since 1998.

"The market seemed pretty confident we were going to be in much better shape in 4-6 months from now. With the resurgence of cases, they're starting to discount that," said Shawn Cruz, senior manager for trader strategy at TD Ameritrade in Jersey City, New Jersey.

The biggest decliner among the 11 major S&P sub-sectors was energy, down 5.5%, as crude prices slumped on news of record storage and concerns about demand.

Utilities, down 0.9%, showed the smallest percentage decline as it is seen as a defensive sector with predictable revenue.

Dell Technologies Inc shares jumped 8.3% after a report said the company was considering spinning off its roughly $50 billion stake in cloud computing software maker VMware Inc . VMware rose 2.3%.

Declining issues outnumbered advancing ones on the NYSE by a 6.84-to-1 ratio; on Nasdaq, a 4.58-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and no new lows; the Nasdaq Composite recorded 44 new highs and 11 new lows.

On U.S. exchanges 13.35 billion shares changed hands compared with the 13.31 billion average for the last 20 sessions.

GLOBAL MARKETS

Rising concerns about a surge in coronavirus infections sent global equities and oil prices lower on Wednesday and pushed investors into perceived safe havens such U.S. Treasuries and gold, which hovered near its highest level in eight years.

Several U.S. states are posting record infections and the death toll in Latin America exceeded 100,000, according to a Reuters tally.

The New York Times reported the European Union was prepared to bar U.S. travelers, putting it in the same category as Brazil and Russia.

Adding to the gloom, European Central Bank chief economist Philip Lane warned the euro zone economy would need a long time to recover despite a string of solid data in recent days.

The United States is considering tariffs on $3.1 billion of exports from Britain, France, Spain and Germany, Bloomberg news reported, citing a notice published by the office of the U.S. Trade Representative.

"With rising daily COVID-19 cases in the U.S. remaining front page news, the headlines are proving to be a weighty burden to bear this morning," Stephen Innes, chief global market strategist at AxiCorp, said.

MSCI's gauge of stocks across the globe shed 2.33% following broad declines in Europe and Asia. The MSCI index has treaded water in recent weeks after jumping more than 40% from March lows on hopes the worst of the pandemic was over.

The International Monetary Fund said it now expects global output to shrink 4.9% this year, much sharper than the 3.0% contraction predicted in April. It also reined in its forecast for a 2021 recovery, calling for global growth at 5.4% compared to 5.8% in the April forecast.

The dollar index rose 0.52%, with the euro down 0.34% to $1.1268. The dollar is approximately 5% below three-year highs touched in March.

"The dollar and risk sentiment are likely to remain broadly negatively correlated, barring the U.S. displaying clear and enduring leadership in the global economic recovery, something hard to square with the grim U.S. news on COVID," said Ray Attrill, head of FX strategy at NAB.

Spot gold dropped 0.2% to $1,762.81 after touching $1,773, its highest since October 2012, in Asian trading. . U.S. gold futures gained 0.23% to $1,776.10 an ounce.

Prices of benchmark 10-year U.S. Treasury notes edged higher, dropping their yields to 0.6839% from 0.709% late on Tuesday.

Concerns about high inventories pushed oil prices broadly lower.

U.S. crude fell 5.85% to $38.01 per barrel and Brent was at $40.11, down 5.91% on the day.

© 2020 Thomson/Reuters. All rights reserved.


   
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Wall Street's three major indexes suffered their biggest daily percentage drop in almost two weeks on Wednesday as a surge in U.S. coronavirus cases intensified fears of another round of government lockdowns and worsening economic damage.
wall street, virus, worries, economic, forecast, stock, market
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2020-08-24
Wednesday, 24 June 2020 04:08 PM
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