U.S. stock benchmarks closed sharply lower Wednesday 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 scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Powell said.
How did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34% fell 516.67 points, or 2.2%, to end at 23,247.97, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.60% retreated 50.12 points, or 1.8%, ending at 2,820. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +2.26% finished at 8,863.17, off 139.38 points, or 1.6%.
What drove the market?
Hopes for a swift U.S. rebound from pandemic shocks collided with 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.