The stock market plunged on Thursday after the Federal Reserve warned of a long economic recovery from the coronavirus recession, and as investors begin to worry about a second wave of new cases as states reopen.
The Dow Jones Industrial Average fell 5.2%, over 1,400 points, by mid-afternoon on Thursday, while the S&P 500 was down 4.2% and the tech-heavy Nasdaq Composite lost 3.5%.
The S&P 500 is on track for a third straight day of losses, turning negative for the year after briefly turning positive for 2020 earlier this week. The Dow is set for its biggest single-day drop since March.
As states continue to reopen, many that have loosened restrictions have seen a spike in new cases. Wall Street is increasingly worried about a second wave of coronavirus infections: Texas, for example, was one of the first states to reopen, but recently reported three consecutive days of record hospitalizations.
Stocks that would benefit from a reopening—including airlines, retailers and cruise operators—have all plunged recently, after having led the market rally in the past few weeks.
Weekly jobless claims fell for the tenth week in a row on Thursday, with 1.5 million more Americans filing for unemployment during the week ending June 6. While that number continues to decline, millions remain unemployed and the job market’s recovery is expected to take years.
Investors also assessed the Federal Reserve’s grim update on the economy: The Central Bank forecasted a long recovery, with unemployment set to remain high for years.
The Fed concluded its two-day meeting on Wednesday by leaving interest rates unchanged near zero and indicating that they will stay there until 2022.
Big number: More than 44 million.
That’s how many people have filed for unemployment over the last three months, as the coronavirus pandemic forced businesses to shutdown on an unprecedented scale.
“We are not even thinking about thinking about raising rates,” Federal Reserve chairman Jerome Powell confirmed at his press conference on Wednesday. He added that while “there is great uncertainty about the future,” the Fed is strongly committed to doing “whatever we can, for as long as it takes” to help support the economy.
Before this week, stocks had continued to rally on optimism about reopening the economy and a faster than expected recovery from the coronavirus recession. The S&P 500 on Monday turned positive for 2020, fully recouping its losses from the coronavirus sell-off earlier this year. This week, however, stocks have taken a hit amid rising concerns over a second wave of coronavirus cases. With investors rotating out of stocks that would benefit from an economic reopening, big tech shares have made a comeback. That helped the Nasdaq hit a new record high on Wednesday, when it closed above 10,000 for the first time ever. Shares of Amazon, Apple, Netflix, Microsoft and Google-parent Alphabet have all been soaring recently, boosting the index higher.
Get The Best Financial Tips
Straight to your inbox
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.
Thank you for subscribing.