Stocks drop as U.S. tops world in coronavirus cases
Stocks fell on Friday as the U.S. claimed the unwelcome position of being the nation with the most coronavirus infections. The decline ended a three-day rally fueled by optimism that the $2 trillion stimulus package would offset some of the economic damage from the coronavirus pandemic.
The Dow shed 915 points, or 4.1%, to 21,637. Through Friday, the index has shed 27% of its value since its most recent peak in February. The broad-based S&P 500-stock index lost 3.4% and tech-heavy Nasdaq composite lost 3.8%.
As infections continue to climb across the U.S., investors are assessing the economic impact, ranging from record high unemployment claims to sinking corporate profits. Almost 3.3 million people filed a claim for jobless aid in the week ending March 21, a nearly fivefold increase over the previous weekly record back in 1982.
Given the mounting economic toll, the relief package making its way through Congress "is a patch, not a panacea for the economy," Morgan Stanley analysts wrote on Friday.
"The package will not help the U.S. avoid lost output that we estimate will be around $920 billion this year, but we estimate it will close that gap by mid-2021 and ensure a faster recovery," they noted.
Not surprisingly, the unemployment claims showed a large impact on service industry jobs, such as restaurant and hotel workers who have lost work as their businesses shut down. But the claims data also showed an increase in manufacturing layoffs, noted High Frequency Economics, which said it expects the impact on jobs to be widespread.
Pantheon Macroeconomics chief economist Ian Shepherdson expects the U.S. to lose between 6 million to 8.5 million jobs over the next several weeks. That would push the April jobless rate to as much as 9%.
"Even as the wave of closures of consumer-facing businesses subsides, the reverberations through supply chains and the business services sectors will drive job losses for several more months," he wrote in a research note.
