Stocks sink worldwide as coronavirus infections rise again
NEW YORK (AP) — Stocks are falling again Monday on fears that new waves of coronavirus infections could derail the swift economic recovery that Wall Street was sure was on the way.
The S&P 500 was down 0.9% in midday trading, though it pared its loss through the morning after being down 2.5% earlier. It follows up on even sharper losses in Asia and milder moves in Europe. The recent stumble for U.S. stocks means they’re now 11% below their record set in February, after a furious rally had brought them back within 6% in the middle of last week.
The Dow Jones Industrial Average was down 338 points, or 1.3%, at 25,267, as of 11:27 a.m. Eastern time, and the Nasdaq composite was down 0.4%.
Roughly three out of four stocks in the S&P 500 were lower, but the losses had been more widespread earlier in the morning, and gains for media companies, home builders and some other stocks helped pull the market off its lows.
Case numbers are still growing in states across the country and nations around the world. Governments are relaxing lockdowns in hopes of nursing their devastated economies back to life, but without a vaccine, the reopenings could bring on further waves of COVID-19 deaths.
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“If globally, we are still in wave 1, then it is possible that without a vaccine, the big wave is still lying out there somewhere waiting to hit,” said Robert Carnell, regional head of research Asia-Pacific at ING.
China is reporting a new outbreak in Beijing, one that appears to be the biggest since it largely stopped its spread at home more than two months ago. In New York, the governor is upset that big groups of people are packing together outside bars and restaurants without face masks, and he threatened to reinstate closings in areas where local governments fail to enforce the rules.
That’s the biggest worry for markets: If infections swamp the world, governments could bring back the orders for people to stay at home and for businesses to shut down that sent the economy into its worst recession in decades. Even if that doesn’t happen, rolling waves of outbreaks could frighten businesses and consumers enough to keep them from spending and investing, which would itself hinder the economy.
The worries hit stocks whose profits most need a reopening economy particularly hard. Travel-related companies had some of the market’s sharpest losses, with Norwegian Cruise Line down 5.8% and United Airlines down 5%.
These stocks had been among the market’s strongest just a week ago, when investors were ebullient about expectations for a coming economic recovery. The hopes got a shot of adrenaline earlier this month when a report showed that U.S. employers added jobs to their payrolls in May, a big surprise when economists were expecting to see millions more jobs lost. That raised expectations that the economy could climb out of its hole nearly as quickly as it plunged into it.
That optimism sent the stock market on a second leg of its rally, which began in March after the Federal Reserve and Congress promised unprecedented amounts of aid to support the economy. The Fed has cut interest rates back to nearly zero and expects to keep them there through 2022, along with pumping money into far-reaching corners of financial markets to keep them running smoothly. Its chair, Jerome Powell, may offer more details about the Fed’s outlook in scheduled testimony before Congress this week.
All through its torrid rally, though, many professional investors were warning that the market’s gains may have been overdone considering how long and uncertain the economic recovery looked to be. The S&P 500 climbed nearly back to its record high last week after earlier being down nearly 34%.
Some of the rally was likely driven by a big influx of individual investors into the market. Brokerages reported big increases in client numbers and trading earlier this year, and stocks popular with individual investors have returned 61% since the market hit a bottom on March 23, according to Goldman Sachs. That’s much more than the 45% rise for stocks popular with hedge funds and traditional mutual funds.
In another sign of increased caution in the market, the yield on the 10-year Treasury note ticked down to 0.68% from 0.69% late Friday. It tends to rise and fall with investors’ expectations for the economy and inflation, and it had been above 0.90% earlier this month.
In Asia, South Korea’s Kospi dropped 4.8%, Japan’s Nikkei 225 lost 3.5% and the Hang Seng in Hong Kong fell 2.2%. In Europe, France’s CAC 40 slipped 0.2%, Germany’s DAX lost 0.2% and the FTSE 100 in London dipped 0.7%