NEW YORK (AP) — Stocks are sinking again Monday on fears that new waves of coronavirus infections could derail the economic recovery that Wall Street was sure was on the way.
The S&P 500 sank 2% in the first few minutes of trading, following up on even sharper losses in Asia and milder ones in Europe. U.S. stocks are now 12% below their record set in February, after a furious rally had brought them back within 5.8% in the middle of last week.
The Dow Jones Industrial Average was down 629 points, or 2.5%, at 24,975, as of 9:48 a.m. Eastern time, and the Nasdaq composite was down 1.5%. The losses were widespread, with 98% of the stocks in the S&P 500 lower.
Case numbers are still growing in states across the country and nations around the world. Governments are relaxing lockdowns in hopes of nursing their devastated economies back to life, but without a vaccine, the reopenings could bring on further waves of COVID-19 deaths.
“If globally, we are still in wave 1, then it is possible that without a vaccine, the big wave is still lying out there somewhere waiting to hit,” said Robert Carnell, regional head of research Asia-Pacific at ING.
China is reporting a new outbreak in Beijing, one that appears to be the biggest since it largely stopped its spread at home more than two months ago. In New York, the governor is upset that big groups of people are packing together outside bars and restaurants without face masks, in violation of restrictions, and he threatened to reinstate closings to keep the virus from spreading.
That’s the biggest worry for markets: If infections swamp the world, governments could bring back the orders for people to stay at home and for businesses to shut down that sent the economy into its worst recession in decades. Even if that doesn’t happen, rolling waves of outbreaks could frighten businesses and consumers enough to keep them from spending and investing, which would itself hinder the economy.
The worries hit stocks whose profits most need a reopening economy particularly hard. Travel-related companies had some of the market’s sharpest losses, with Norwegian Cruise Line down 7.4% and United Airlines down 6.9%.
These stocks had been among the market’s strongest just a week ago, when investors were ebullient about expectations for a coming economic recovery. Better-than-expected reports on the U.S. jobs market raised hopes that the worst of the recession may have already passed or will soon and that growth could resume later this year.
That optimism sent the stock market on a second leg of its rally, which began in March after the Federal Reserve and Congress promised unprecedented amounts of aid to support the economy. All through its torrid rally, though, many professional investors were warning that the market’s gains may have been overdone considering how long and uncertain the economic recovery looked to be.
In another sign of increased caution in the market, the yield on the 10-year Treasury note fell to 0.66% from 0.69% late Friday. It tends to rise and fall with investors’ expectations for the economy and inflation, and it had been above 0.90% earlier this month.
In Asia, South Korea’s Kospi dropped 4.8%, Japan’s Nikkei 225 lost 3.5% and the Hang Seng in Hong Kong fell 2.2%. in Europe, France’s CAC 40 dropped 1.2%, Germany’s DAX lost 1.2% and the FTSE 100 in London slipped 1.5%