Stocks slump on economy worries, erase much of week’s gain
Published 4:33 pm Thursday, July 9, 2020
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By STAN CHOE and DAMIAN J. TROISE
AP Business Writers
NEW YORK (AP) — Stocks are slumping on Wall Street Thursday amid worries that recent improvements in the economy may be set to stall as coronavirus cases continue to climb.
The S&P 500 was 0.9% lower, as of 2:00 p.m. Eastern time, with the sharpest losses hitting oil producers, banks, airlines and other stocks whose fortunes are most closely tied to a reopening and strengthening economy. Treasury yields fell, while the price of gold hung close to its highest level since 2011 in signs of continued caution in the market.
The Dow Jones Industrial Average was down 365 points, or 1.4%, at 25,701. Smaller stocks sank more than the rest of the market, which often happens when investors are downgrading their expectations for the economy. The Russell 2000 index of small-cap stocks lost 1.7%.
Tech stocks were holding up better than the rest of the market, as investors continue to bet they can keep growing almost regardless of the economy’s strength. They helped the Nasdaq composite to a small gain.
“The broad equity market is navigating through a zone of uncertainty,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.
“There are ample reasons for caution,” he said. “Clearly there’s uncertainty surrounding the impact and duration of this virus.”
Thursday’s headline economic report showed that a little more than 1.3 million workers filed for unemployment claims last week. It’s an astoundingly high number, but it’s also down down from 1.4 million the prior week and from a peak of nearly 6.9 million in late March.
The improvements back up investor optimism that the economy can recover as states and other governments relax restrictions put in place earlier this year to slow the coronavirus pandemic. Such optimism has helped the S&P 500 recently climb back to within roughly 7% of its record set in February, after earlier being down nearly 34%.
But economists point to a troubling slowdown in the pace of improvements, including moderating declines in the four-week average of jobless claims .
“At best, these numbers are deemed ‘less bad,’ but still seem to be indicating that we are traveling on a ‘slow boat’ to a recovery that looks nothing like the ‘V’ that so many had hoped it would be,” Kevin Giddis, chief fixed income strategist at Raymond James, wrote in a report.
Investors are worried that worsening infection levels across swaths of the U.S. South and West, among other global hotspots, could derail the budding recovery. Some states are rolling back their reopenings, while others are ordering people arriving from hotspots to quarantine.
Markets have been quick to react to infection and hospitalization rates in Florida and other big Sun Belt states in particular. Thursday’s losses for stocks accelerated after Florida reported the largest daily increase in deaths yet from the pandemic, with its cumulative death toll topping 4,000.
Such concerns helped push Treasury yields lower. The yield on the 10-year note, which tends to move with investors’ expectations for the economy and inflation, sank to 0.60% from 0.65% late Wednesday.
The price of gold also held above $1,800 per ounce. Gold tends to rise when investors are worried about the economy, and on Wednesday it touched its highest price since September 2011. Gold was down 0.9% at $1,803.50 per ounce in Thursday afternoon trading after earlier flipping between small gains and losses.
In the stock market, the sharpest losses hit companies whose profits tend to rise and fall most closely with the strength of the economy. Energy stocks dropped 3.8% for the biggest loss among the 11 sectors that make up the index. Exxon Mobil sank 3.6%, and ConocoPhillips fell 5.7%.
Financial stocks were also particularly weak, as a struggling economy raises the threat of borrowers failing to repay their loans. Bank of America dropped 2.6%, Citigroup lost 2.8% and JPMorgan Chase fell 2%.
Other companies that desperately need the pandemic to ease so customers can return also struggled. United Airlines lost 6.2%, and mall-owner Simon Property Group fell 4.9%.
Walgreens Boots Alliance slumped 9% for one of the biggest losses in the S&P 500 after it said it lost $1.7 billion in the latest quarter as the pandemic kept its customers around the world at home.
Companies across the country are preparing to report their second-quarter results in upcoming weeks, and forecasts are uniformly dismal.
If the S&P 500 ends up lower for the day, it would be just its second loss in the last eight days. Its loss so far on Thursday trimmed its gain for the week to 0.4%.
Trading has been erratic lately, though, with many gains coming only after the index bounced up and down repeatedly through the day. It mirrors the market’s movement’s over much of the last month, as investors struggle through massive amounts of uncertainty.
In European stock markets, Germany’s DAX was virtually flat, while France’s CAC 40 fell 1.2%. The FTSE 100 in London lost 1.7% after the Treasury chief warned about the depth of the recession there and more big retailers said they had to cut jobs.
In Asia, Chinese stocks continued their huge run. Stocks in Shanghai added another 1.4%, bringing its gain for July to 15.6% and further stoking worries that speculators are in charge of the market.
The Nikkei 225 in Tokyo added 0.4%, as did South Korea’s Kospi. The Hang Seng in Hong Kong gained 0.3%.
Benchmark U.S. crude dropped 2.8% to $39.76 per barrel. Brent crude, the international standard, slipped 2.4% to $42.26 per barrel.
