U.S. stocks slumped in the final hour of trade Wednesday to end three days of gains, as investors monitored signs of a revival of the coronavirus pandemic in some U.S. states and China, while still hoping for a quick economic recovery as business activity resumes.
Investors also parsed the second day of Congressional testimony by Federal Reserve Chairman Jerome Powell in which he underscored the lasting toll of the pandemic.
How did benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.58% shed 170.37 points, or 0.7%, to end at 26,119.61, after flipping negative late in the session. The S&P 500 /zigman2/quotes/210599714/realtime SPX -1.31% fell 11.25 points, finishing at 3,113.49, or 0.4% lower. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.92% gained 14.66 points, or 0.2%, closing at 9,910.53, off its best levels of the day.
On Tuesday, the Dow rose 526.82 points, or 2%, to end at 26,289.98. The S&P 500 index added 58.15 points to close at 3,124.74, a gain of 1.9%. The Nasdaq Composite Index advanced 169.84 points, or 1.8%, to end at 9,895.84.
The Dow and S&P on Wednesday snapped three straight sessions of gains, while the Nasdaq extended its win streak to a fourth day and eked out its fourth highest close on record.
What drove the market?
Investors monitored the trajectory of new coronavirus cases, as business activity resumes after lockdowns, along with a fresh outbreak in China, but the focus remains on the path to economic recovery, amid some progress in developing therapeutic drugs and vaccines against COVID-19.
Fed Chair Powell’s testimony on Wednesday underscored that Hispanics, African Americans and women have been hit particularly hard by the pandemic, since they are more likely to have low-wage service sector jobs dealing with the public, during day two of his Congressional testimony.
Powell also said some form of unemployment insurance should continue past the expiration date of July 31, and defended the central bank’s more than $2 trillion slate of emergency funding to keep credit flowing during the pandemic.
“The Fed’s really focused on jobs. And getting people back to work,” John Kaprich, Aware Asset Management’s investment director, told MarketWatch. “They don’t want corporate entities to worry or to do anything that would hinder that.”
New York Gov. Andrew Cuomo said Wednesday that New York City is slated to enter “Phase 2 ” of reopening on Monday, which would allow restaurants and bars to offer outdoor seating, hair salons to reopen, and some professional services, like finance and insurance, to return to their offices.
Meanwhile, Arizona, Florida, Oklahoma, Oregon and Texas all saw record increases in new cases on Tuesday, while hospitalizations in Texas, Nevada and Florida hit records, according to Reuters .
Investors still think local and state governments will be loath to reinstate lockdown measures that have proven punishing for businesses and households, but airlines and retail stocks, which would benefit from the economy reopening, lost ground Wednesday while technology stocks gained.
But China canceled flights to and from Beijing, restricted movement of people, and closed schools in the capital city, after 137 new cases were reported in recent days. The fresh outbreak may have originated from Xinfadi, a produce market in the southern part of the city, Reuters reported .
“If COVID-19 were to get so bad this fall that the economy had to totally shut down, stocks would fall and fall hard. But right now, even with a surge, the general consensus is that the economy won’t completely shut down again,” said James Meyer, chief investment officer at Tower Bridge Advisors.
Recent economic data has investors hoping for a so-called V-shaped, or quick, recovery from the current recession. Reports from the U.K. of successful outcomes from a steroidal treatment for severe cases of COVID-19 also have supported that view.