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At the beginning of the week, Wall Street was quite optimistic being supported by the signs of strength in the service sector, however, now the performance of its key components shows a downtrend.
The United States Stock market on Tuesday shook off its budding growth as some of its key markets records an unprecedented downturn. The Nasdaq Composite closed 0.9% lower at 10,343.89 after showing signs of growth in the day. The Dow Jones Industrial Average dropped 396.85 points, or 1.5%, to 25,890.18 while the S&P 500 fell by 1.1% to 3,145.32.
The plummeting figures come after Wall Street showed bullish trends on Monday. The Dow Jones Industrial Average (INDEXDJX: .DJI) rose 459.67 points, or 1.78%, to 26,287.03, the S&P 500 gained 49.71 points, or 1.59%, to 3,179.72 and the Nasdaq Composite (INDEXNASDAQ: .IXIC) added 226.02 points, or 2.21%, to 10,433.65. The less than 48 hours Stock market drop can be attributed to growing concerns about the increasing cases of the coronavirus pandemic, which, according to the experts, can cause untold economic downturn for the country.
Stump in Tech Rallies
The tech-based companies in the United States are pivotal to the country’s economic and market performance and account for about 17.5% of the S&P 500. The technology-based companies were the biggest beneficiaries during the coronavirus lockdown. Businesses that run digital/online platforms were able to connect appropriately with customers as stores were closed. The gradual reopening of the economy also sparked the upward trend of stocks but all seems to be losing momentum right now.
Among the top gainers was Netflix Inc (NASDAQ: NFLX), American media services provider which increased its membership as a result of the confinement experienced in Q1 2020. In the declaration of its first-quarter earnings, the company revealed it added 15.8 million global subscribers to increase its total subscribers to 183 million. The company grew its shares by 10% during the pandemic but the upward rally showed signs of losing its momentum as its shares closed 0.1% lower on Tuesday after hitting a record earlier in the day.
Amazon.com Inc (NASDAQ: AMZN) stood out as a top gainer amidst the lockdown. The e-commerce giant recorded about $75.5 billion in sales during the lockdown representing an increase of 26% from a year earlier. The stellar performance of AMZN during the lockdown has contributed to the boost in Jeff Bezos‘s net worth of $171.6 billion. Amazon also saw a notable decline of 1.9% on Tuesday.
On the travel scene, American Airlines and United Airlines fell 6.95% and 7.6% respectively with border lockdown still but Uber Technologies Inc (NYSE: UBER) maintains its upward ride with a 0.92% increase.
Uncertainties Surrounding New COVID-19 Cases
Wall Street analysts are concerned about the probable impact of the rising cases of COVID-19 on the economy.
As Mark Haefele, chief investment officer at UBS noted:
“While we expect continued volatility, we think there are grounds for optimism that economies and markets can weather the recent acceleration in infections. There are signs that healthcare systems are coping better with COVID-19, reducing the need for restrictions on freedom of movement. Economic data continues to point to resilience”.
The fight for a COVID-19 vaccine got a boost yesterday as the U.S. government-funded Novavax Inc (NASDAQ: NVAX) with $1.4 billion to develop a vaccine. While there are other biopharmaceuticals working on it, there is no certain date as to when it would be made available.
With the new cases, the government is not poised to take drastic measures as it did when it locked the economy earlier in the year and as a result, businesses can rely on the strength of the health system to contain the rising cases.