Late slump on Wall Street leaves stock market broadly lower
An afternoon slump on Wall Street gained momentum in the last hour of trading, leaving stocks broadly lower and erasing some of the market’s gains from last week.
The S&P 500 lost 2.1% Tuesday. The weakness came as investors debate whether the lifting of lockdowns around the world will drive an economic rebound or just more coronavirus infections.
Underscoring the concerns, the top U.S. infectious diseases expert, Dr. Anthony Fauci, told Congress that if the country reopens too soon, it could lead to needless “suffering and death” and set back efforts to get the economic going again.
U.S. indexes spent much of the day flipping between small gains and losses before turning lower in the early afternoon. The S&P 500 was down 0.6%, as of 2:30 p.m. Eastern time, and Treasury yields were also lower in a sign of increased caution following mixed performances in European and Asian stock markets.
Governments around the world and in many U.S. states have begun gradually lifting restrictions on businesses, which were meant to slow the spread of the coronavirus outbreak but also caused a severe recession. Expectations that growth will resume following the reopenings has helped drive the S&P 500 up about 30% since late March.
But South Korea and other countries further ahead in removing restrictions have also seen small but notable increases in infections. That’s raising worries about possible second waves of infections, which is keeping enthusiasm in check.
Underscoring the concerns was testimony from the top U.S. infectious diseases expert. Dr. Anthony Fauci told Congress that if the country reopens too soon, it could not only cause “some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery.”
The Dow Jones Industrial Average was down 145 points, or 0.6%, at 24,076 after drifting between an earlier gain of 160 points and a loss of 176 points. The Nasdaq was down 0.2%.
“What we’re dealing with, both today and the last couple of weeks, is the optimism behind the reopening and asking: Are we going to be reopening too soon?” said Bill Northey, senior investment director at U.S. Bank Wealth Management.
“We’re in an unknowable scenario at this point in time,” he said.
After dropping by roughly a third from February into late March on worries about the coming recession, the S&P 500 began recovering after the Federal Reserve and Capitol Hill flooded the economy with trillions of dollars in aid. The latest implementation came Tuesday, with the New York Fed beginning to buy exchange-traded funds, or ETFs, to support the corporate bond market.
With all that unprecedented support in place, markets are now focusing much more on when the economy can resume growing and less on reports coming in daily that show how badly the economy has been hurt by the pandemic. Inflation in the United States was just 0.3% last month from a year earlier, weaker than economists expected, as purchases withered amid widespread stay-at-home orders. But the report released Tuesday morning caused only minor ripples in markets.
Treasurys were some of the first investments to signal the economic devastation coming from the pandemic. The yield on the 10-year Treasury slipped to 0.68% from 0.72% late Monday. It tends to fall when investors are downgrading their expectations for the economy and inflation.
The yield is still well below the roughly 1.90% level where it started the year, but it has been climbing since setting a record low in early March of a little less than 0.50%.
Stocks whose profits are most closely tied to the strength of the economy had some of the sharpest losses.
Financial stocks in the S&P 500 fell 1.7%. They’ve struggled this year on worries that the recession will force waves of households and businesses to default on their loans. JPMorgan Chase fell 2%, and Bank of America lost 2.1%.
Many companies are opting to give no financial forecasts as they release their latest quarter earnings report, due to overwhelming uncertainty over what lies ahead. That was true of Toyota Motor, whose shares fell 2% Tuesday as it reported its net profit dropped nearly 90% in the January-March quarter from a year earlier, though it said it expected a recovery as the pandemic is brought under control.
In the United States, Simon Property Group likewise said it’s currently impossible to predict future results amid the pandemic, and it withdrew its financial forecast for 2020. But its stock was still close to flat after it said it plans to have about half of its U.S. shopping malls reopened within the next week.
Uber rose 5% after analysts said news reports of a possible takeover attempt of food delivery company Grubhub make strategic sense. Grubhub jumped 34.5%.
A barrel of U.S. oil to be delivered in June rose 6.8% to $25.78 per barrel. Brent crude, the international standard, added 0.9% to $29.91.
In Europe, Germany’s DAX was down 0.1%, while France’s CAC 40 was down 0.4%. The FTSE 100 in London was up 0.9%. In Asia, Japan’s Nikkei 225 slipped 0.1%, Hong Kong’s Hang Seng fell 1.4% and South Korea’s Kospi lost 0.7%.
AP Business Writer Elaine Kurtenbach contributed.