Rising COVID-19 cases spoil the show for the markets on Wednesday. The U.S. has reported the single biggest spike on June 24 beating all previous records and thereby putting the chances of economic recovery under pressure.
The stock market continues to remain volatile with the rising concerns of coronavirus cases. On Wednesday, June 24, the United States reported 45,000 new COVID-19 cases in the highest ever single-day beating April records which affected market indices, including Dow.
As reported by NBC news, some health experts attributed this latest surge to Memorial Day. A majority of the cases come from Southern and Western states where the official started easing up lockdown and reopening businesses.
On Wednesday, after the news about COVID-19 situation, the Dow Jones Industrial Average (INDEXDJX: .DJI) crashed 2.57% or 700 points to 25,445 levels at closing. Other indices like Nasdaq Composite (INDEXNASDAQ: .IXIC) and the S&P 500 (INDEXSP: .INX) also tanked over 2%. Earlier on Tuesday, the markets rallied on the announcement of economic stimulus to overcome COVID-19 challenges. However, the sudden spike of cases on Tuesday killed the positive sentiments of investors.
The state of Florida reported a surge of 5500 cases with the total going close to 110,000. The positivity rate in Florida also jumped by 50% to 15.91% from the previous 10.82%. On Tuesday, California also reported a dramatic spike with more than 7000 cases in a single day.
The badly hit Airline Industry which showed some recovery on the reopening of the economy is again under pressure. Stocks of all the major airlines crashed between 7-8% on Tuesday. Peter Boockvar, chief investment officer at Bleakley Advisory Group said:
“It’s definitely the reason for the last leg down. Airline stocks and transports are down, and oil tanked. The regional quarantine sparked concerns about a dampening of activity as the economy in the region is just reopening.”
Is it Too Early for the Market to Celebrate the Economic Recovery?
With the Federal Reserve initiating several measures for economic recovery, investors at Wall Street have turned a bit more hopeful. Moreover, the U.S. manufacturing data recently released shows that the contraction is declining, which is a positive indicator. However, the continuous spike in COVID-19 cases casts a big shadow on the recovery side.
Reportedly the loosened restrictions have contributed to new cases as hospitals remain overwhelmed with new patients. Speaking to CNBC, Chris Rupkey, chief financial economist at MUFG, said:
“The latest coronavirus news is not positive for the stock market which was betting the worst of the pandemic recession was behind us. All the hopes of investors looking for a better economy to improve the bottom lines of companies shut down in the recession have been dashed. Forget about the fears of the virus coming back in the fall, the number of new cases and hospitalizations in states like Arizona, Texas, and Florida says the threat is happening right now.”
After Wednesday’s sell-off, Dow Futures have tanked another 200 points hinting. The tech-heavy Nasdaq 100 futures and S&P 500 futures also opened in negative. Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said:
“The market has been optimistic that the economy is re-opening and that life would get somewhat back to normal, but the virus may have other ideas. The market has again gotten caught up in the crossfire of increasing numbers of Covid-19 cases, trade protectionism and politics.”
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