U.S. stocks slumped in the final hour of trade Wednesday to end three days of gains, as investors monitored signs of a revival of the coronavirus pandemic in some U.S. states and China, while still hoping for a quick economic recovery as business activity resumes.
Investors also parsed the second day of Congressional testimony by Federal Reserve Chairman Jerome Powell in which he underscored the lasting toll of the pandemic.
How did benchmarks fare?
The Dow Jones Industrial Average DJIA, -0.64% shed 170.37 points, or 0.7%, to end at 26,119.61, after flipping negative late in the session. The S&P 500 SPX, -0.36% fell 11.25 points, finishing at 3,113.49, or 0.4% lower. The Nasdaq Composite COMP, +0.14% gained 14.66 points, or 0.2%, closing at 9,910.53, off its best levels of the day.
On Tuesday, the Dow rose 526.82 points, or 2%, to end at 26,289.98. The S&P 500 index added 58.15 points to close at 3,124.74, a gain of 1.9%. The Nasdaq Composite Index advanced 169.84 points, or 1.8%, to end at 9,895.84.
The Dow and S&P on Wednesday snapped three straight sessions of gains, while the Nasdaq extended its win streak to a fourth day and eked out its fourth highest close on record.
What drove the market?
Investors monitored the trajectory of new coronavirus cases, as business activity resumes after lockdowns, along with a fresh outbreak in China, but the focus remains on the path to economic recovery, amid some progress in developing therapeutic drugs and vaccines against COVID-19.
Fed Chair Powell’s testimony on Wednesday underscored that Hispanics, African Americans and women have been hit particularly hard by the pandemic, since they are more likely to have low-wage service sector jobs dealing with the public, during day two of his Congressional testimony.
Powell also said some form of unemployment insurance should continue past the expiration date of July 31, and defended the central bank’s more than $2 trillion slate of emergency funding to keep credit flowing during the pandemic.
“The Fed’s really focused on jobs. And getting people back to work,” John Kaprich, Aware Asset Management’s investment director, told MarketWatch. “They don’t want corporate entities to worry or to do anything that would hinder that.”
Recap: Powell testifies to Congress — second day
New York Gov. Andrew Cuomo said Wednesday that New York City is slated to enter “Phase 2” of reopening on Monday, which would allow restaurants and bars to offer outdoor seating, hair salons to reopen, and some professional services, like finance and insurance, to return to their offices.
Meanwhile, Arizona, Florida, Oklahoma, Oregon and Texas all saw record increases in new cases on Tuesday, while hospitalizations in Texas, Nevada and Florida hit records, according to Reuters.
Investors still think local and state governments will be loath to reinstate lockdown measures that have proven punishing for businesses and households, but airlines and retail stocks, which would benefit from the economy reopening, lost ground Wednesday while technology stocks gained.
But China canceled flights to and from Beijing, restricted movement of people, and closed schools in the capital city, after 137 new cases were reported in recent days. The fresh outbreak may have originated from Xinfadi, a produce market in the southern part of the city, Reuters reported.
“If COVID-19 were to get so bad this fall that the economy had to totally shut down, stocks would fall and fall hard. But right now, even with a surge, the general consensus is that the economy won’t completely shut down again,” said James Meyer, chief investment officer at Tower Bridge Advisors.
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Recent economic data has investors hoping for a so-called V-shaped, or quick, recovery from the current recession. Reports from the U.K. of successful outcomes from a steroidal treatment for severe cases of COVID-19 also have supported that view.
In U.S. economic news, housing starts rose 4.3% in May to an annualized pace of 974,000 from a five-year low of 934,000. But economists polled by MarketWatch had forecast starts to rise to a 1.13 million. On the more positive side, building permits increased by 14.4% to an annualized pace of 1.22 million.
John Cunnison, chief investment officer at Baker Boyer in Washington state, said that fresh economic data points to “an economy that’s creating all sorts of pent up demand,” including in the housing market where record low rates on 30-year mortgages are enticing more millennials to consider home ownership.
But he also pointed to “woefully slow” progress in terms of comprehensive testing and tracking of COVID-19 cases across the U.S., as likely thwarting any quick economic recovery.
“If we get on the other side of this virus, there are reasons for being fairly bullish,” he told MarketWatch.
Which stocks were in focus?
- Exxon Mobil Corp XOM, -3.25% and Chevon Corp CVX, -2.64% led the Dow lower, while a selloff in energy stocks also weighed on the S&P 500 and Nasdaq. The Nasdaq still eked out a gain for the session.
- Hertz Global Holdings Inc. HTZ, +2.56% suspended its controversial $500 million share offering Wednesday, after the car-rental company was its was “advised orally” by staffers at the U.S. Securities and Exchange Commission of their review of the planned offering. Shared ended 2.6% higher.
- Tempur Sealy International Inc.’s stock TPX, +5.10% gained 5.1% after the mattress company said that its orders rebounded in May.
- McDonald’s Corp MCD, +0.24% stock rose 0.3% Tuesday when the restaurant chain reported upbeat sales for May.
- Shares of Southwest Airlines Co. LUV, -0.71% lost 0.7% even after the air carrier increased its revenue outlook and said it sees capacity improving in July.
- Facebook FB, -0.05% is launching a widespread effort to boost U.S. voter turnout and provide authoritative information about voting. The social media company’s stock fell 0.1%.
- United States Steel Corp. X, -10.41% tumbled 10.4% after the company said it expected second-quarter losses to be much severe than projections.
- More companies were issuing debt on Wednesday, following the Fed’s announcement that it would start buying individual corporate bonds on Monday. Abercrombie & Fitch Co., Energizer Holdings Inc., Merck & Co. and Eldorado Resorts Inc. are among the companies selling bonds.
- Oracle ORCL, -5.62% slipped after reporting fiscal fourth-quarter net income of $3.11 billion, or 99 cents a share, compared with $1.07 a share in the year-ago period. Revenue declined to $10.44 billion from $11.14 billion in the year-ago quarter. Its shares fell 5.6%.
- T-Mobile US Inc. TMUS, -0.25% said late Wednesday Peter Osvaldik, senior vice president of finance and chief accounting officer, will become its chief financial officer effective July 1. Shared ended 0.3% lower.
How did other assets perform?
West Texas Intermediate U.S. crude CLN20, -1.73% fell Wednesday, shedding 42 cents, or 1.1%, to settle at $37.96 a barrel on the New York Mercantile Exchange after a 3.4% surge on Tuesday.
The greenback traded up 0.2% to 97.11, as gauged by the ICE U.S. Dollar index DXY, -0.09%.
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Precious metals fell, with August gold GCM20, +0.22% on Comex retreated 90 cents, or 0.1%, to finish at $1,735.60 an ounce.
The 10-year Treasury note yield TMUBMUSD10Y, 0.723% fell 2.2 basis points to 0.732%. Bond prices move in the opposite direction of yields.
In global equities, the Stoxx Europe 600 index SXXP, +0.74% booked a 0.7% gain, after a 2.9% gain on Tuesday, while the FTSE 100 index UKX, +0.16% climbed 0.2%, following its 2.9% surge.
In Asia markets, China’s benchmark CSI 300 index 000300, +0.07% closed less than 0.1% higher, following a 1.5% rally on Tuesday, while the Shanghai Composite Index SHCOMP, +0.14% edged up 0.1% after its rose 1.4% on Tuesday, and the Japanese Nikkei NIK, -0.56% shed 0.5% in Asia trade on Wednesday after a powerful 4.9% rally in the prior session. Hong Kong’s Hang Seng HSI, +0.56% climbed 0.6%, added to its 2.4% gain on Tuesday and South Korea’s Kospi picked up 0.1% after its 5.3% advance a day ago.
Mark DeCambre contributed reporting
Originally published on MarketWatch