This week's stock market rout deepened Wednesday on concerns that rising numbers of coronavirus infections in the U.S. and Europe will push governments to bring back restrictions on businesses.
The Dow Jones industrial average tumbled 943.24 points, or 3.4%, to 26,519.95, adding to recent declines after the blue-chip average shed 650 points on Monday and lost more than 200 points Tuesday. It was the Dow's worst day since June 11.
The S&P 500 dropped 3.5% to 3,271.03, its third straight loss. The index has now given up 5.6% so far this week and is on track for its biggest weekly fall since March, when markets were in a downward spiral. The broad index was off 8.7% from its Sept. 2 record.
The Nasdaq Composite slumped 3.7% to 11,004.87.
For the first time since the pandemic began, the United States added more than half a million coronavirus cases in a week, according to a USA TODAY analysis of Johns Hopkins University data. This is the third day in a row the U.S. set a record for how many coronavirus cases it reported over the previous seven days.
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Markets were dropping even more sharply in Europe, where investors expect the French president to announce tough measures to slow the virus’ spread and German officials agreed to impose a four-week partial lockdown. The measures may not be as stringent as the shutdown orders that swept the world early this year, but the worry is they could still hit the already weakened global economy.
Declines in the U.S. were led by losses in companies that would benefit from the economy reopening, including airline and cruise liners.
“Seeing restrictions going back into effect in Europe is giving some investors an unwelcome déjà vu feeling, and their automatic response is to hit the ‘sell’ button," Greg McBride, chief financial analyst at Bankrate, said in a note. "That is a recipe for future regret.”
The stock market staged a stunning turnaround over the summer, propelled by Big Tech as trillions of dollars in stimulus aid from the Federal Reserve and Congress helped prop up an American economy gripped by recession. The resurgence came despite a backdrop of historic job losses, bankruptcies and shrinking corporate profits.
Still, investors shrugged off a string of dismal economic data in recent months and a spike in outbreaks, opting to instead scoop up stocks at bargain prices as hope grows for an economic recovery with further stimulus and a vaccine.
But optimism has faded that the pandemic may have been brought somewhat under control as infections continue to rise in the U.S., Europe and other parts of the world. Investors are clamoring for Congress to deliver more virus relief for the U.S. economy, but they’re increasingly acknowledging it won’t happen anytime soon.
The uncertainty surrounding the upcoming U.S. election also has left market players wary.
“With the U.S. election next week, virus cases rising across the globe, and the lack of an agreement on stimulus in Congress, it appears market participants have shifted toward a risk-off tone,” Charlie Ripley, senior investment strategist at investment advisor Allianz Investment Management, said in a note, referring to investors taking a more cautious approach.
Other analysts agree.
“We are experiencing the storm before the calm. We are in the thick of election uncertainty, and a rise of COVID infections that rattles markets,” Jamie Cox, managing partner at Harris Financial Group, said in a note. “The country is under significant stress. Thankfully, November has the potential to settle some big, outstanding issues.”
Governments have begun to impose restrictions on businesses and other activities to help curb surging infections. That could choke off improvements seen since the summer. Fresh pandemic precautions are also drawing a public backlash despite spiking levels of illness in European countries.
A USA TODAY analysis of Johns Hopkins data through late Tuesday shows 20 states set records for new cases in a week while three states had a record number of deaths in a week: Nebraska Tennessee and Wyoming. The U.S. has reported more than 8.7 million cases and more than 226,600 deaths.
To be sure, even though market volatility will likely pick up in the next week due to uncertainty surrounding the election results, analysts remain optimistic about the economic recovery on prospects for a COVID-19 vaccine.
“Regardless of whether we see a surge this fall and winter, at some point the virus will run its course and whether it’s a vaccine or more effective treatments that accelerates this process, consumers will eventually get back to ‘normal,’” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, a registered investment advisor, said in a note.
Economists expect a report on Thursday to show that the U.S. economy grew at an annual rate of 30.2% during the summer quarter after shrinking 31.4% during the second quarter.
Wall Street’s caution is also apparent in how it’s reacting to corporate profit reports. Through the first two weeks of earnings season, companies that reported better results than expected have not been getting the typical pop in their stock price the day after.
Stocks of companies that most need the virus to abate for their businesses to get back to normal were slumping to some of the sharpest losses. Cruise operators Carnival, Royal Caribbean and Norwegian Cruise Line all dropped at least 7%.
Investors, meanwhile, headed into the safety of U.S. government bonds. The yield on the 10-year Treasury note fell to 0.78% from 0.79% late Tuesday. It was as high as 0.87% last week.
Contributing: The Associated Press
This article originally appeared on USA TODAY: Dow drops 900 points as COVID-19 cases surge