Stocks down as coronavirus outbreaks flare in U.S., China
Stocks tumbled as Wall Street grew pessimistic about the prospects for an economic recovery amid an uptick in new coronavirus cases across more than a dozen U.S. states. Investors were also spooked by a new outbreak in Beijing, illustrating how the virus can return after restrictions are eased.
The Dow Jones Industrial Average declined 572 points, or 2.2%, to 25,033 in early trading on Monday, before regaining some of its losses. The broad-based S&P 500 slipped 1.6%, while the tech-heavy Nasdaq fell 1%.
Fears are growing that the increase in new cases could push some mayors and governors to pause their regions' reopenings, noted Height Securities analysts in a client note. Until last week, the stock market had rallied from a mid-March low on expectations that consumers would open up their wallets once lockdowns ended. But the potential for a quick recovery may be hampered by a rise in new cases in states such as Texas, where the number of people hospitalized from the coronavirus hit a record high of 2,287 on Sunday.
"Some states may choose to halt advances in the next phases of reopenings, and some county or city leaders may attempt to shut things down again," noted Raymond James analysts Chris Meekins and Ed Mills in a research report.
Aside from Texas, 13 other states have had recent upticks in cases, including Arizona, Florida and North Carolina, Raymond James noted. Despite the increase in new cases in some regions, it's more likely that politicians could turn to options such as activating hospital emergency plans and pausing reopenings rather than entering new lockdowns, according to Height Securities.
China is dealing with a new outbreak of the virus in its capital city, where officials reported 36 new cases on Monday. Beijing officials have put 21 neighborhoods on lockdown and ordered 90,000 residents to be tested for the virus.
The stock market plunged Thursday after Federal Reserve Chairman Jerome Powell predicted 15 million Americans would remain unemployed by year end, and cautioned that a recovery may take longer than some had expected. Prior to that decline, the market had rallied from its mid-March low on expectations for an economic recovery amid trillions in government stimulus funding. But new infections across the U.S. are prompting investors to reassess those assumptions.
Among the stocks witnessing the biggest declines are travel and retail-related companies, which are dependent on an easing of lockdowns and other restrictions to convince consumers to return to their pre-pandemic spending patterns. American Airlines shed 5.7%, while Delta lost 4.7% in early trading. Retailers suffering losses included Gap, which fell 3.7%, and Macy's, which shed 5.4%.