Wall Street drops after reopening worries lead to late slide

A worker cleans near a bank's currency advertisement board in Seoul, South Korea, Tuesday, May 12, 2020. Shares are lower in Asia as news of fresh outbreaks of coronavirus cases and more infections among White House staff overshadowed hopes Tuesday over reopening economies. (AP Photo/Lee Jin-man)
A worker cleans near a bank's currency advertisement board in Seoul, South Korea, Tuesday, May 12, 2020. Shares are lower in Asia as news of fresh outbreaks of coronavirus cases and more infections among White House staff overshadowed hopes Tuesday over reopening economies. (AP Photo/Lee Jin-man)

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Worries about the downside of reopening the economy too soon are weighing on markets, and Wall Street fell Tuesday to its biggest loss since the start of the month.

The S&P 500 dropped 2.1 percent after spending much of the day drifting between small gains and losses, as investors debate whether the lifting of lockdowns across U.S. states and the world will drive an economic rebound or just more coronavirus infections.

The concerns were summed up in straightforward testimony from top U.S. infectious diseases expert Dr. Anthony Fauci, who told Congress that if the country reopens too soon, it could not only cause "some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery."

The S&P 500 fell 60.20 points to 2,870.12, with the losses accelerating sharply in the last hour of trading. Stocks of companies whose profits are most closely tied to the strength of the economy had some of the market's sharpest drops. Treasury yields also fell in a sign of increased caution.

The Dow Jones Industrial Average fell 457.21 points, or 1.9 percent, to 23,764.78, and the Nasdaq composite lost 189.79, or 2.1 percent, to 9,002.55.

Governments around the world and in some U.S. states have already begun gradually lifting restrictions on businesses, which were meant to slow the spread of the coronavirus outbreak but have also caused a severe recession. Expectations that growth will resume following the reopenings have helped drive the S&P 500 up 28 percent since late March.

After dropping by roughly a third from February into late March on worries about the coming recession, the S&P 500 began recovering after the Federal Reserve and Capitol Hill flooded the economy with trillions of dollars in aid. The latest implementation of that came Tuesday, when the New York Fed began buying funds to support the corporate bond market.

With all that unprecedented support in place, markets are now focusing much more on when the economy can resume growing and less on reports coming in daily that show how badly the economy has been hurt by the pandemic. Inflation in the United States was just 0.3% last month from a year earlier, for example, but the report had limited effect on markets.