U.S. stock benchmarks traded sharply lower Wednesday afternoon as Wall Street digested a grim near-term economic outlook from Federal Reserve Chairman Jerome Powell and as state and federal officials attempt to restart businesses from a coronavirus-induced lockdown.
“The recovery may take some time to gather momentum and the passage of time can turn liquidity problems into solvency problems,” Powell said.
What are major indexes doing?
The Dow Jones Industrial Average
fell 460 points, or 1.9%, to 23,297, while the S&P 500 index
retreated 51 points, or 1.8%, at 2,818. The Nasdaq Composite Index
traded at 8,844, off 158 points, or 1.8%.
What’s driving the market?
Hopes for a swift U.S. rebound from pandemic shocks collided with Chairman Powell’s “highly uncertain” near-term outlook for the economy on Wednesday, even as businesses across the nation work to reopen.
Powell said additional government aid to households and businesses may be “worth it” to keep lasting damage to the economy from developing, during a webcast discussion with the Peterson Institute for International Economics on Wednesday.
“Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said, but added it was ultimately up to Congress and the administration to consider this trade-off.
“Everyone’s scared and everyone’s shell shocked,” Kent Engelke, chief economic strategist at Capitol Securities Management, told MarketWatch. “You wonder how many days can this go on and people are on edge,” he said, adding that Powell and Dr. Anthony Fauci “didn’t say anything new, they just validated the fears we have.”
Investors cited remarks by Fauci on Tuesday as contributing to the sour mood in equities. The director of the National Institute of Allergy and Infectious Diseases told a Senate committee that reopening too soon could lead to more disease outbreaks and unnecessary deaths.
“Millions of Americans are thinking they’re going to wake up from it. They’re just going to go back to work or reopen their restaurant,” Jason Thomas, chief executive officer at Savos Investments, a division of AssetMark, told MarketWatch.
“It’s becoming more and more clear that’s just not how it plays out.”
Hedge-fund investor David Tepper also gave a sobering assessment of the U.S. stock market, saying recent levels made it the “second-most overvalued” he’s seen, after the 1999-2000 tech bubble, in an interview with CNBC on Wednesday.
Tepper also said the Fed’s extraordinary backstop of financial markets could lead to further stock gains.
However, Powell said not to expect negative interest rates, after the fed funds futures market last week, for the first time, showed some traders betting they could become reality in the U.S.
President Donald Trump on Tuesday tweeted that the U.S. should accept “the GIFT” of negative rates.
In U.S. economic reports, the April producer-price index plunged by 1.3%. Economists surveyed by MarketWatch, on average, forecast the index to fall 0.5%.
Which companies are in focus?
- General Electric Co.
shares tumbled 5.9% in afternoon trading Wednesday, putting them on track for a 29-year closing low, amid growing concerns over the troubled aerospace industry as the COVID-19 pandemic continues.
- Shares of Tesla Inc.
retreated 3.4% despite a news report late Tuesday saying the electric vehicle maker would fully reopen its battery “gigafactory” in Nevada, after Tesla reopened its auto factory in Fremont, California., on Monday in defiance of local regulations.
- Ride-hailing company Uber Technologies Inc.
and Grubhub Inc.
have been unable to agree on a price that would see Uber acquire the food-delivery company, CNBC reported late Tuesday. Uber also announced it would sell $750 million of bonds due 2025. Shares of Uber were down 1.5%, while those for Grubhub fell 5.8%. Opinion: Uber plus Grubhub called ‘a new low in pandemic profiteering,’ and that is not the only problem
- Royal Caribbean Cruises Ltd. shares
fell 5.7% Wednesday, after the cruise operator said it would sell $3.3 billion of debt. The company will use the proceeds to pay down another $2.35 billion loan.
- Goodyear Tire & Rubber Co.(TICKER:GT) said it would sell $600 million of bonds. The tire maker expects to use the proceeds from the offering to repay debt set to mature in August. Its shares were down 6.8%.
- Walmart Inc.,
Dollar General Corp
and BJ’s Wholesale Club Holdings
shares were mostly higher after BofA Securities raised their stock price targets for the grocery and goods retailers. Walmart’s target was raised to $145 from $140. Shares edged 0.8% higher.
How are other markets trading?
Crude-oil prices fell Wednesday, with West Texas Intermediate Crude for June delivery
down 80 cents, or 3.1%, to $24.96 a barrel. In precious metals, the price of an ounce of June gold
rose $9.60, or 0.6%, to settle at $1,716.40.
The U.S. dollar strengthened slightly against a basket of its six major rivals, with the ICE U.S. dollar
was up 0.3%. The greenback is up 3.9% year-to-date.
In Europe, stocks were on the slide. The Stoxx Europe 600
William Watts provided additional reporting