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Market Snapshot: Dow opens more than 800 points lower as U.S. coronavirus cases rise, after Fed’s grim economic outlook

U.S. stocks tumbled early Thursday as investors worried about signs of coronavirus cases rising again and digested Wednesday’s downbeat economic outlook from the Federal Reserve. Read More...

U.S. stocks swooned Thursday as coronavirus cases continued to rise and investors digested Wednesday’s downbeat economic outlook from the Federal Reserve.

The market moves came even as the number of Americans filing for jobless benefits for the first time continued to decline in the most recent week.

How are benchmarks performing?

The Dow DJIA, -2.65% fell 856 points, 3.2%, to open near 23,133, while the S&P 500 SPX, -2.33% gave up 84 points or 2.6% to open near 3,106 The Nasdaq Composite COMP, -2.05% opened 220 points, 2.2%, lower, near 9,800, one day after charting a new record above 10,000.

On Wednesday, the Dow fell 282.31 points, or 1%, to end at 26,989.99. The S&P 500 shed 17.04 points, or 0.5%, finishing at 3,190.14. The Nasdaq climbed 66.59 points, or 0.7%, to close at 10,020.35.

While both the S&P 500 and the Dow are up about 45% from the low in late March, the S&P 500 is down 1.2% this year and the Dow is down 5.4% for 2020, though the Nasdaq Composite rose for eight days in the past nine sessions, bringing its 2020 gains to nearly 10%.

What’s driving the market?

The number of U.S. coronavirus infections passed the two million mark and over 112,000 Americans have died, according to Johns Hopkins University. Despite fewer cases being recorded in some cities and states, the seven-day average of new cases over the last two weeks is still rising in more than 20 states, leading investors to worry about a second wave of the epidemic just as business activity is resuming.

President Trump announced he will resume holding election rallies with the first in Tulsa, Oklahoma on June 19th but he is not expected to require that attendees practise social distancing.

The global case tally for the coronavirus climbed to 7.39 million on Thursday, according to data The death toll rose to 417,022.

“Up until yesterday financial markets didn’t appear overly concerned about the prospect of a second wave,” said Michael Hewson, chief market analyst at CMC Markets UK, in a Thursday research note. However, he noted that the “prospects, appear to have concentrated minds in the wake of recent gains, and sending the usual suspects of travel, as well as oil and gas stocks sharply lower”

Meanwhile, on Wednesday the Fed’s updated policy statement and projections indicate that it expects a 6.5% contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3%, well above the Fed’s estimate of the long-run rate forecast of 4.1%.

The central bank’s dour outlook has a lot to do with the stock market sell-off, said Kristina Hooper, Invesco chief global market strategist.

“The stock market has almost had blinders on,” Hooper said in an interview. “More than one in three companies in the S&P 500 are dispensing with earnings guidance. So investors have anchored to data, which has been relatively positive about reopenings in various states, improvements in PMIs and the jobs report last week. In one fell swoop Jay Powell threw a lot of cold water on that narrative.”

Hooper thinks the market moves of this week aren’t necessarily the start of a sustained leg downward. “Typically the initial reaction to the Fed press conference is not the subsequent reaction. There needs to be some digestion by investors.”

FED RECAP: Fed provides update on economic outlook and policy thinking

In U.S. economic data Thursday, another 1.54 million Americans filed for initial jobless claims, the government said. That beat expectations for 1.565 million people seeking unemployment benefits, according to the Econoday consensus.

Although new jobless claims have been falling since March, more than 2.2 million applications for unemployment compensation were filed in the last week of May through state and federal relief programs. That is almost as many as the 2.5 million jobs regained by the economy in the entire month.

Producer prices moved fractionally upward in May, the government said, notching their first increase in four months. Economists had forecast another decline/

Looking ahead, investors also will watch an update on the Fed’s balance sheet, which hit $7.21 trillion last week, and the money supply at 4:30 p.m. Eastern.

Which stocks are in focus?
  • Children’s Place Inc. PLCE, -5.97% shares were nearly 7% lower in early action after reporting results that missed analyst expectations and said it plans to shutter hundreds of stores.
  • Shares of Oneok Inc. OKE, -11.23% tumbled 15% Thursday, after the natural gas services company announced a public offering of 26 million shares of common stock.
  • Smith & Wesson Brands Inc. SWBI, -3.37% shares were 1% lower after the bell on Thursday even after a Wedbush analyst more than doubled his price target, to $18 from $8.50.
  • Shares of United Airlines Holdings Inc. UAL, -9.95% , Delta Airlines Inc DAL, -9.02% , and American Airlines Group Inc. AAL, -9.92% all dropped more than 12% in early trading.
  • GrubHub Inc. GRUB, +6.30% shares rose nearly 5% after the company agreed to be acquired by a Dutch company.

Related:Here are the biggest stock-market bets among institutional and retail investors, ranked

How are other assets faring?

Oil prices traded lower on Thursday, as the Fed promised to keep rates near zero. West Texas Intermediate CLN20, -7.92% lost $2.70 cents, or 6.8%, trading at $36.90 a barrel on the New York Mercantile Exchange.

The greenback picked up 0.4% against its major rivals, as gauged by the ICE U.S. Dollar index DXY, +0.40%.

In precious metals, August gold GCM20, +1.40% on Comex gained $10.10, or 0.6%, at $1,723.40 an ounce as investors piled into less-risky assets.

The 10-year Treasury note yield TMUBMUSD10Y, 0.678% fell about 6 basis points to 0.68% after the central bank said rates were likely to remain lower for much longer. Bond prices move in the opposite direction of yields.

In global equities, the Stoxx Europe 600 index SXXP, -3.17% was down 0.4%, while the FTSE 100 index UKX, -3.13% shed 0.1%.

In Asia, Japan’s Nikkei NIK, -2.82% tumbled 2.2% higher, the FTSE 100 index UKX, -3.13% declined 1.1%. China CSI 300 000300, -1.08% finished up 1.1% lower and Hong Kong’s Hang Seng Index HSI, -2.27% closed off 2.3%. South Korea’s Kospi index 180721, -0.86% retreated 0.9%.

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