Wall Street collapsed on Thursday and its main indicator, the Dow Jones Industrials, lost 6.9% on its worst day since the March stock market debacle due to fears of a second wave of COVID-19 and negative forecasts from the Federal Reserve about the evolution of the US economy.
According to provisional data at the close of the session on the New York Stock Exchange, the Dow Jones fell 1,861.82 points, the biggest cut seen since mid-March, to 25,128.17 whole points, dragged down by large listed companies such as Boeing (-16.43%), Dow Inc (-9.87%), IBM (-9.16%), Goldman Sachs (-9.10%) or Exxon Mobil (-8.85%).
The selective S&P 500 fell by 5.89 % or 188.04 points, to 3,002.10 units; and the Nasdaq composite market index, which had linked three consecutive records in the last sessions, fell by 5.27 % or 527.62 points, to 9,492.73 units.
The New York Stock Exchange bet massively on sales after several days of optimism for the U.S. economic reopening in view of an increase in COVID-19 infections in the states of Texas, Arizona, California and Florida, which makes one fear a resurgence.
The number of reported cases of coronavirus in the country has reached 2 million and the number of deaths from it has reached 111,000, according to the latest data from Johns Hopkins University.
Investors fear that states will again impose business shutdowns and lockdowns to prevent the spread, although Treasury Secretary Steven Mnuchin said this morning that the country cannot afford to close its economy again because the damage “would be greater.
On Thursday, the Labor Department reported that last week, another 1.5 million Americans applied for unemployment benefits, a figure that still indicates a slowdown but already adds up to some 44 million people who have asked for help since mid-March.
Wall Street also reacted to the bad forecasts made Wednesday by the president of the Federal Reserve (Fed), Jerome Powell, who said that the recovery in the U.S. will be slower than expected and estimated a 6.5% contraction in GDP in 2020, although he promised to make the central bank’s tools available to the financial markets.
Analyst Dennis DeBusschere of Evercore ISI noted in a note that the Fed’s monetary policy cannot “counter a second severe wave of COVID-19” and, amidst new contagion in three states and concern that anti-racist protests will generate more, “the risk of weak, economic and profit-driven growth has increased.
The Vix volatility index, known as the “fear indicator” in the market, has now shot up by more than 51%.
By sector, the worst hit was energy (-9.45%), followed by finance (-8.18%), basic materials (-7.74%) and industry (-7.05%).
At the corporate level, the shares of firms related to leisure and tourism that had been increasing in value in recent days due to reopening, such as American Airlines or the Carnival cruise chain, lost nearly 15%.
In other markets, Texas oil also fell sharply, by 8.2%, to $36.34 a barrel, due to fears that a second wave of COVID-19 will again cripple the economy and hit the demand for fuel.
Investors turned to safe assets and by the end of Wall Street, gold was up to $1,734.30 an ounce, the 10-year Treasury bond yield was down to 0.671% and the dollar was gaining ground against the euro, with a change of 1.129.