Wall Street Wilts on Economy Worries 07/09 15:48
Most of Wall Street wilted Thursday on worries that the economy's recent
improvements may be set to fade as coronavirus cases keep climbing.
NEW YORK (AP) -- Most of Wall Street wilted Thursday on worries that the
economy's recent improvements may be set to fade as coronavirus cases keep
The S&P 500 lost 0.6%, with three in four stocks within the index falling.
The sharpest drops hit oil companies, airlines and other stocks whose fortunes
are most closely tied to a reopening and strengthening economy. Treasury yields
also sank in another sign of increased caution.
The Dow Jones Industrial Average dropped 361.19 points, or 1.4%, to
25,706.09, while the 17.89 point fall for the S&P 500 to 3,152.05 was just its
second loss in the last eight days.
Smaller stocks sank more than the rest of the market, which often happens
when investors are downgrading their expectations for the economy. The Russell
2000 index of small-cap stocks lost 28.48, or 2%, to 1,398.92.
The Nasdaq composite was an outlier as investors continue to bet big
tech-oriented stocks can keep growing almost regardless of the economy's
strength. It added 55.25, or 0.5%, to 10,547.75 and hit another record.
"The broad equity market is navigating through a zone of uncertainty," said
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.
"There are ample reasons for caution," he said. "Clearly there's uncertainty
surrounding the impact and duration of this virus."
Thursday's headline economic report showed that a little more than 1.3
million workers filed for unemployment claims last week. It's an astoundingly
high number, but it's also down from 1.4 million the prior week and from a peak
of nearly 6.9 million in late March.
The improvements help validate investors' earlier optimism that the economy
can recover as states and other governments relax restrictions put in place
earlier this year to slow the coronavirus pandemic. Such optimism helped the
S&P 500 rally back to within 7% of its record, after earlier being down nearly
But economists point to a troubling slowdown in the pace of improvements,
including moderating declines in the four-week average of jobless claims.
Further gains for the job market are going to be more difficult, said Patrick
Schaffer, global investment specialist at J.P. Morgan Private Bank. The U.S.
unemployment rate is currently 11.1%.
"The initial jump was the easy part," he said. "The reality is the labor
market continues to face enormous headwinds."
Investors are worried that worsening infection levels across swaths of the
U.S. South and West and in other global hotspots could derail the budding
recovery. Some states are rolling back their reopenings, while others are
ordering people arriving from hotspots to quarantine.
"When the restrictions were relaxed in the beginning part of June, you saw
parts of the tangible economy do really well," Schaffer said. "A lot of that
has been unwound as we've seen a resurgence in case count and some restrictions
being put in place."
Markets have been quick to react to infection and hospitalization rates in
Florida and other big Sun Belt states in particular. Thursday's losses for
stocks accelerated after Florida reported the largest daily increase in deaths
yet from the pandemic, with its cumulative death toll topping 4,000.
Such concerns helped push Treasury yields lower. The yield on the 10-year
note, which tends to move with investors' expectations for the economy and
inflation, sank to 0.60% from 0.65% late Wednesday.
The price of gold also held above $1,800 per ounce. Gold tends to rise when
investors are worried about the economy, and on Wednesday it touched its
highest price since September 2011. After flipping between small gains and
losses, gold for delivery in August dipped $16.80 to settle at $1,803.80.
In the stock market, the sharpest losses hit companies whose profits tend to
rise and fall most closely with the strength of the economy. Energy stocks
dropped 4.9% for the biggest loss among the 11 sectors that make up the index.
Exxon Mobil sank 4.1%, and ConocoPhillips fell 6.6%. Benchmark U.S. crude
dropped $1.28 to settle at $39.62 per barrel.
Financial stocks were also particularly weak, with JPMorgan Chase down 2.2%
and Citigroup down 2.8%, as a struggling economy raises the threat of borrowers
failing to repay their loans.
Airlines and other companies that desperately need the pandemic to ease so
customers can return also slumped. United Airlines lost 7.3%, retailer Kohl's
sank 7.2% and mall-owner Simon Property Group fell 5.3%.
Walgreens Boots Alliance dropped 7.8% for one of the biggest losses in the
S&P 500 after it said it lost $1.7 billion in the latest quarter as the
pandemic kept many of its customers around the world at home.
Companies across the country are preparing to report their second-quarter
results in upcoming weeks, and forecasts are uniformly dismal.
Stocks in overseas markets were mixed, though China continued its huge run.
Stocks in Shanghai added another 1.4%, bringing its gain for July to 15.6% and
further stoking worries that speculators are in charge of the market.