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The path to economic recovery looks bleak, delayed, and uncertain at this point as the daily COVID-19 cases continue to hit a record high in the US. Even the latest positive vaccine news has failed to hold up the market.
On Thursday, November 12, the Dow Jones Industrial Average (INDEXDJX: .DJI) dropped 300 points or 1% closing at 29,080 levels. The recent Dow Jones drop comes amid concerns regarding the health of the economy and the rising COVID-19 cases.
During the day trading, DJIA dropped nearly 500 points, however, managed to pull itself back above $29,000. The S&P 500 (INDEXSP: .INX) also tanked 1% closing at 3537 levels while the Nasdaq Composite (INDEXNASDAQ: .IXIC) tanked 0.65% closing at 11,709.59 levels.
The latest market drop comes despite the positive COVID-19 vaccine news in the market. Earlier this week, Dow Jones jumped over 1000 points as Pfizer Inc (NYSE: PFE) and BioNTech SE (NASDAQ: BNTX) announced that its COVID-19 vaccine candidate shows over 90% efficacy rate. Another forerunner in the vaccine race – Moderna Inc (NASDAQ: MRNA) – said that its vaccine candidate has been as effective as Pfizer’s. As per the scientists, an efficacy rate above 75% is considered as good.
Interestingly, banking giant Goldman Sachs has also predicted a faster than expected recovery of the global economy in 2021. Based on the vaccine developments, the banking giant estimates that the vaccine should be out by January 2021. However, the latest statements from Federal Reserve Chairman Jerome Powell about the uncertain economic outlook has dampened the market sentiments. Powell said:
“From our standpoint, it’s just too soon to assess with any confidence the implications of the news for the path of the economy, especially in the near term. With the virus spreading, the next few months could be challenging.”
COVID-19 Cases on a Record Surge Once Again Pulling Dow Jones Down
The second wave of coronavirus is already here with the recent surge in the coronavirus cases making new record highs. On Wednesday, the US registered 144,000 confirmed COVID-19 cases as the nationwide tally spikes above 10 million. Chicago has already issued a stay-at-home advisory while New York has imposed a fresh curfew on bars, gyms, and restaurants.
Apart from the US, parts of Europe have already entered partial lockdown. Travel and banking stock took a major hit on Thursday. In a note to investors, Yousef Abbasi, global market strategist at StoneX wrote:
“With several of the early November catalysts out of the way, the market does appear to be expressing concern with some of the near-term COVID trends which have seen the US report record case counts and eight consecutive days of over 100k new cases”.
Rick Rieder, head of the global allocation team at BlackRock, however, expects the economic recovery to continue despite the surge in coronavirus cases. He said:
“The Fed is going to stay in this accommodative mode for a period of time. When you put that much stimulus in, you put that much liquidity in, and then you add fiscal stimulus … the economy will actually do pretty well.”
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