NEW YORK — Wall Street’s major indexes tumbled on Friday as several U.S. states imposed business restrictions in response to a surge in coronavirus cases.
Several U.S. states that were spared the brunt of the initial coronavirus outbreak or moved early to lift restrictions are seeing a resurgence in new infections. On Friday, Texas and Florida ordered bars to close down again.
“You’re seeing a pretty dramatic increase in cases,” said Kevin Grogan, managing director of investment strategy at Buckingham Strategic Wealth in St. Louis. “If people start feeling again like it’s not safe to eat out or go shopping, that could have a really negative impact on the stock market.”
A Wall Street Journal report that the Phase 1 U.S.-China trade deal could be at risk placed additional pressure on U.S. stocks. According to that report, Chinese officials warned that “meddling” in Hong Kong and Taiwan could lead Beijing to back away from its commitment to purchase U.S. farm goods.
“It added another log into the risk aversion fire,” said Edward Moya, senior market analyst at OANDA in New York, of the report on China.
Among sectors, financial, communication services and energy shares outpaced the broader S&P 500 in declines. Bank shares plummeted after the Federal Reserve limited dividend payments and barred share repurchases until at least the fourth quarter following its annual stress test.
Renewed concerns over the novel coronavirus pandemic has threatened to derail a strong rally for Wall Street that has erased much of the S&P 500’s steep losses from March. During Friday’s session, the S&P 500 traded below its 200-day moving average, an indicator of long-term momentum.
The uptick in coronavirus cases likely triggered a test of that technical level, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
Unofficially, the Dow Jones Industrial Average fell 732.97 points, or 2.85 per cent, to 25,012.63, the S&P 500 lost 74.9 points, or 2.43 per cent, to 3,008.86 and the Nasdaq Composite dropped 258.92 points, or 2.58 per cent, to 9,758.08. The TSX was down 257 points at 15,188.
Facebook Inc shares tumbled after Unilever PLC and Verizon Communications Inc joined an advertising boycott that called out the social media giant for not doing enough to stop hate speech on its platforms.
Nike Inc shares dropped as the footwear maker, hurt by store closures due to the pandemic, posted a surprise quarterly loss.
Gap Inc shares surged after the retail chain entered a 10-year deal with rapper and fashion designer Kanye West to create a line of clothing under his Yeezy brand.
Friday also marked the reconstitution of the FTSE Russell indexes, including the large-cap Russell 1000 and small-cap Russell 2000.
© Thomson Reuters 2020