Dow slumps more than 1,000 points as U.S. coronavirus cases rise, after Fed’s grim economic outlook

U.S. stocks swooned Thursday as coronavirus cases continued to rise and investors digested Wednesday’s downbeat economic outlook from the Federal Reserve.

The market moves came even as the number of Americans filing for jobless benefits for the first time declined again in the most recent week.

How are benchmarks performing?

The Dow DJIA, -4.30% was 1,050 points, 3.9%, lower mid-morning, near 25,940, while the S&P 500 SPX, -3.62% gave up 104 points or 3.3% to trade near 3,086. The Nasdaq Composite COMP, -2.73% was down about 237 points, 2.4%, near 9,783, one day after charting a new record above 10,000. The small-cap Russell 2000 RUT, -5.38% slid 72 points, or nearly 5%, notching its worst one-day performance in ten weeks.

On Wednesday, the Dow fell 282.31 points, or 1%, to end at 26,989.99. The S&P 500 shed 17.04 points, or 0.5%, finishing at 3,190.14. The Nasdaq climbed 66.59 points, or 0.7%, to close at 10,020.35.

While both the S&P 500 and the Dow are up about 45% from the low in late March, the S&P 500 is down 1.2% this year and the Dow is down 5.4% for 2020, though the Nasdaq Composite rose for eight days in the past nine sessions, bringing its 2020 gains to nearly 10%.

What’s driving the market?

The number of U.S. coronavirus infections passed the two million mark and over 112,000 Americans have died, according to Johns Hopkins University. Despite fewer cases being recorded in some cities and states, the seven-day average of new cases over the last two weeks is still rising in more than 20 states, leading investors to worry about a second wave of the epidemic just as business activity is resuming.

President Trump announced he will resume holding election rallies with the first in Tulsa, Oklahoma on June 19th but he is not expected to require that attendees practise social distancing.

The global case tally for the coronavirus climbed to 7.39 million on Thursday, according to data The death toll rose to 417,022.

“The stock market has almost had blinders on,”said Michael Hewson, chief market analyst at CMC Markets UK, in a Thursday research note. “More than one in three companies in the S&P 500 are dispensing with earnings guidance. So investors have anchored to data, which has been relatively positive about reopenings in various states, improvements in PMIs and the jobs report last week. In one fell swoop Jay Powell threw a lot of cold water on that narrative.”

“Up until yesterday financial markets didn’t appear overly concerned about the prospect of a second wave,” Hewson said. However, he noted that the “prospects, appear to have concentrated minds in the wake of recent gains, and sending the usual suspects of travel, as well as oil and gas stocks sharply lower”

Hooper thinks the market moves of this week aren’t necessarily the start of a sustained leg downward. “Typically the initial reaction to the Fed press conference is not the subsequent reaction. There needs to be some digestion by investors.”

On Wednesday the Fed’s updated policy statement and projections indicate that it expects a 6.5% contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3%, well above the Fed’s estimate of the long-run rate forecast of 4.1%.

The central bank’s dour outlook has a lot to do with the stock market sell-off, said Kristina Hooper, Invesco chief global market strategist.

FED RECAP: Fed provides update on economic outlook and policy thinking

In U.S. economic data Thursday, another 1.54 million Americans filed for initial jobless claims, the government said. That beat expectations for 1.565 million people seeking unemployment benefits, according to the Econoday consensus.

Although new jobless claims have been falling since March, more than 2.2 million applications for unemployment compensation were filed in the last week of May through state and federal relief programs. That is almost as many as the 2.5 million jobs regained by the economy in the entire month.

Producer prices moved fractionally upward in May, the government said, notching their first increase in four months. Economists had forecast another decline/

Looking ahead, investors also will watch an update on the Fed’s balance sheet, which hit $7.21 trillion last week, and the money supply at 4:30 p.m. Eastern.

More:

https://www.marketwatch.com/story/dow-futures-tumble-550-points-as-stock-market-investors-watch-rising-cases-of-coronavirus-fed-offers-grim-outlook-of-us-economy-2020-06-11?&mod=home-page