Stocks fell on Wednesday as investors grappled with concerns around the economy reopening along with downbeat remarks from the top-ranking Federal Reserve official amid jitters about reopening the economy.
The Dow Jones Industrial Average dropped 225 points, or nearly 1%. The S&P 500 traded 0.6% lower while the Nasdaq Composite dipped%.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Fed Chairman Jerome Powell said in prepared remarks for a webcast event with the Peterson Institute for International Economics, noting that more needs to be done to sustain the economy. Powell added, however, the economy should see a substantial recovery once the coronavirus is under control.
Powell’s remarks came after the Labor Department reported last week that a record 20.5 million jobs were lost in April. They also come as several states begin reopening their economies, raising concern among experts about the potential of a second wave of coronavirus cases.
Washington D.C. extended its stay-at-home orders until June 8. Los Angeles County’s public health director said Tuesday the region’s stay-at-home order will “with all certainty” last through July. While several southern states have already started to let nonessential businesses resume operations.
“Everything is dependent on the next several months and how successful businesses can re-open,” Nick Raich, CEO of The Earnings Scout, wrote in a note. “All the stimulus in the world will not offset businesses closing their doors for an extended time.”
Exxon Mobil and American Express were the worst-performing stocks in the Dow, falling at least 3% each. Energy and financials led the S&P 500 lower by falling 2.8% and 1.5%, respectively. Gains from Amazon and Netflix gave the Nasdaq a boost.
Wall Street was coming off of sharp losses from the previous session, as jitters about the economic reopening sent the major averages tumbling in the final hour of trading.
“You have a market just waiting to see how the economy opens,” said Quincy Krosby, Prudential chief market strategist.. “You’ve got the S&P 500 at an important technical level, which is 3,000, and it needs a catalyst to climb above that. One of the main catalysts will be if the economy can open up without an increase in cases.”
Dr. Anthony Fauci said Tuesday that a vaccine will be essential in stopping the coronavirus spread, but warned it will be a while before a usable one is available. Fauci added the U.S. could face more “suffering and death” if states start to reopen too quickly.
“Even though market participants know Dr. Fauci’s stand on opening the economy too soon, to hear him testify also helped to underpin the view that if you do move too quickly you run the risk of causing cases to rise,” Krosby said.
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