Wall Street’s earlier bets the economy can make a relatively quick rebound from the coronavirus pandemic suddenly don’t look so good.
The S&P 500 fell 1.7 percent Wednesday for its second straight loss, with the biggest hits targeting companies that most need a healthy economy for their profits to grow. Treasury yields also sank in a sign of pessimism after Federal Reserve Chair Jerome Powell warned about the threat of a prolonged recession.
Powell said the U.S. government may need to pump even more aid into the economy, which is bleeding millions of jobs every week. His comments came one day after the top U.S. infectious diseases expert, Dr. Anthony Fauci, warned of the dangers of reopening the economy too soon. Together, they threw some cold pessimism onto hopes rising recently among some investors that growth could resume later this year as economies reopen.
The S&P 500 fell 50.12 points to 2,820.00. The Dow Jones Industrial Average dropped 516.81 points, or 2.2 percent, to 23,247.97, and the Nasdaq composite lost 139.38, or 1.5 percent, to 8,863.17.
It’s the latest wobble for a market that has been wavering in recent weeks after coming off its best month in a generation. The S&P 500’s 26 percent rally got going in late March following promises of massive aid from the Federal Reserve and Capitol Hill. It then accelerated on optimism as several countries and U.S. states began relaxing restrictions on businesses that were meant to slow the spread of the coronavirus but also caused a severe recession.
Many professional investors have been skeptical of the rally, though, saying it was overdone given how much uncertainty exists about how long the recession will last.
And Wednesday’s worries the recovery may not be as strong or as rapid as investors had been banking on just a week ago hit stocks whose profits are closely tied to the economy’s strength particularly hard.