U.S. stocks finished sharply lower Wednesday, booking their worst drop in about two weeks, as investors worried that rising coronavirus cases in many American states will set back economic recovery.
All 11 sectors in the S&P 500 index were lower after Florida and California booked daily records for new cases, while intensive-care unit beds in Houston, Texas were reported at 97% capacity.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.28% shed 710.16 points, or 2.7%, ending at 25,445.94. The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.18% fell 80.93 points, or 2.6%, to end at 3,0501.33. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.06% gave up 222.20 points, or 2.2%, finishing at 9,909.17, a day after booking a fresh record closing high.
It was the worst daily point and percentage drop for all three stock benchmarks since June 11, according to Dow Jones Market Data.
On Tuesday, the Dow Jones Industrial Average rose 131.14 points, or 0.5%, to close at 26,156.10, The S&P 500 index gained 13.43 points, or 0.4%, finishing at 3,131.29. The Nasdaq Composite Index rose 74.89 points, or 0.7%, to end at a new 10,131.37 record.
What drove the market?
New York, New Jersey and Connecticut announced 14-day quarantines on Wednesday on visitors from states with high COVID-19 infection rates. The “travel advisory,” which impacts residents of nine states, raises concerns about the pace of business activity resuming after lockdowns imposed to contain the spread of the pandemic.
“Once you start talking about quarantines, there’s a potential that it will lead to less travel,” James Ragan, director of wealth management research at D.A. Davidson, in Seattle told MarketWatch, adding that markets had been rallying on the reopening story, underscored by improving consumer activity and daily airline travel.
“If that starts to slow, that does create the narrative that the recovery could be on pause,” Ragan said.
Airline stocks swooned, with shares of the U.S. Global Jets Exchange Traded Fund /zigman2/quotes/207744796/composite JETS -0.87% closing down 5.5%, American Airlines Group Inc /zigman2/quotes/209207041/composite AAL -1.57% 7.1% lower and United Airlines Holdings Inc . /zigman2/quotes/205037281/composite UAL -1.39% off 8.3%.
The 7-day average of daily new COVID-19 cases increased more than 30% compared with a week ago, according to a CNBC analysis of Johns Hopkins University data, while Bloomberg noted coronavirus cases are surging in Texas, Florida, Arizona and California with some city and state officials considering slowing or reversing business reopening plans.
Texas Gov. Greg Abbott on Tuesday advised all the state’s residents to stay home, while intensive-care beds at Houston’s Texas Medical Center were reported as 97 percent occupied. Hospitals in the state have been grappling with a more than doubling of patients hospitalized with coronavirus since the beginning of the month.
“We have a coronavirus gut check in the market. The news we’ve seen recently suggest the recovery is going to be uneven,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services, in an interview.
Lerner also thinks part of the selloff could be related to mutual funds and pension funds needing to rebalance their gains from equities to bonds before the end of the quarter. The sharp rebound in stocks since March have led some investors to become overweight to equities, analysts said.
On Tuesday, at a Congressional hearing, public-health expert Dr. Anthony Fauci described the rise in cases as “disturbing,” while vowing to increase testing, but also saying he was hopeful about a vaccine.