U.S. stocks on Tuesday ended sharply lower, with the S&P 500 snapping its 5-day win streak, as investors grew wary of the economic, public-health and policy response to the coronavirus pandemic.
Equities lost steam after the White House reiterated a call to cap the next round of COVID-19 stimulus at $1 trillion or less, but accelerated their losses in the final hour of trade, after several Federal Reserve officials warned of challenges to the economy as infection rates soar across several states.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% tumbled 396.85 points, or 1.5%, to end at 25,890.18, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.49% shed 34.40 points, or 1.1%, closing at 3,145.32 and end a 5-session win steak; while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +2.32% fell 89.76 points, or 0.9%, to finish at 10,343.89, after carving out an intraday 10,518.98 record.
On Monday, the Dow gained 459.67 points, or 1.8%, to end at 26,287.03. The S&P 500 climbed 49.71 points, or 1.6%, ending at 3,179.72 and matching its longest win streak, five straight sessions, since the period ended Dec. 17; while the Nasdaq surged 226.02 points, or 2.2%, to 10,433.65, scoring its third straight record and its 24th of the 2020.
What drove the market?
Nagging unease over the outlook for the global economy in the midst of rising U.S. coronavirus infections helped dampen the buying mood on Wall Street.
The White House added to those concerns Tuesday when Vice President Mike Pence’s top aide said the Trump administration wants Congress to cap the next COVID-19 stimulus package at $1 trillion or less, during an interview with Bloomberg Radio .
“There’s obviously been a lot of stimulus put in the system over the last couple bills, and so the price tag for us would be that,” said Marc Short, Pence’s chief of staff.
Jon Adams, senior market strategist at BMO Global Asset Management, pointed to the interview as one of the reasons why the stock rally took a breather Tuesday. “It’s really clear to us that policy is driving markets and seems to be the only thing that matters,” he told MarketWatch. “We’re constructive on risk assets, but perhaps a bit less so than a few months ago.”
While calls from the Republican ranks for limits on further coronavirus relief aren’t new, the latest salvo from the White House comes as U.S. coronavirus cases neared 3 million, and Arizona, California, Texas and other states were expressing concerns about their hospitals rapidly filling up.
The Trump administration also on Tuesday began the formal process of withdrawing from the World Health Organization, starting the clock on a one-year exit timeline and jeopardizing its top funding source for aid during a global pandemic.
Earlier in the session, investors drew some hope from an employment report that showed a record 6.5 million people either found jobs or were rehired in May, following a prolonged shutdown due to the coronavirus that drove the U.S. into a deep recession.
Job openings also rose to 5.4 million in April from 5 million in the prior month, according to a Labor Department report that’s released with a one-month delay. The number of jobs available was running around 7 million before the pandemic.
However, San Francisco Fed President Daly said Tuesday the U.S. unemployment rate underestimates the economic damage of the virus, while Richmond Fed President Barkin said the central bank still has “more to do” with the jobless rate at 11.1%, during a virtual talk on the pandemic at the National Association for Business Economics.