The stock market dropped sharply on Thursday—erasing its gains for the week—as investors worry that the recent surge in coronavirus cases across the country could lead to a further economic downturn.
The Dow Jones Industrial Average fell 1.4%, nearly 400 points, on Thursday, while the S&P 500 was down 0.6% and the tech-heavy Nasdaq Composite gained 0.5%.
Investors are increasingly worried that a surge in new coronavirus infections around the country could delay or derail an economic recovery, with virus fears causing more volatility in the market.
But the Nasdaq hit a fresh record high as tech stocks continued to rally: Shares of big tech companies like Amazon, Microsoft, Apple and Google-parent Alphabet have all led the market higher recently.
Jobless claims came in lower than expected on Thursday morning, with Labor Department data showing 1.3 million more Americans filing for unemployment last week, down slightly from 1.4 million the week before.
Shares of companies that would benefit from a reopening of the economy—including airlines, cruise stocks and some retailers—moved lower as many states continued to see a spike in new coronavirus cases.
The United States surpassed 3 million cases earlier this week, as outbreaks continue to worsen in many states: Florida, for instance, reported a record number of coronavirus hospitalizations and deaths on Thursday.
Retail stocks in particular took a hit after Walgreens Boots Alliance said it would cut 4,000 jobs at its Boots chain in the UK, while Bed Bath & Beyond reported that sales plunged by almost 50% last quarter.
“Equity price action continues to signal increasing amounts of market anxiety,” says Vital Knowledge founder Adam Crisafulli. “Investors are growing incrementally concerned about the fundamental landscape—and the tech splurge is leaving behind a dangerously unbalanced market.” He also warns that while “markets have been dismissive of the COVID transmission spike because other numbers weren’t rising,” hospitalizations have been rising for several days and fatalities “may now be following suit.”
What to watch for
The U.S. economy might not recover to pre-coronavirus levels until possibly 2022, according to Atlanta Federal Reserve President Raphael Bostic. “The models that I’m looking at right now suggest that by the end of the year we’ll have more jobs and more growth than we have now, but we won’t be at a level where we were pre-crisis,” he said Thursday during a Tax Policy Center webinar.
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