Dow falls for a third-straight day, losing 500 points after Powell’s warning

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

Stocks fell on Wednesday as investors grappled with downbeat remarks from the top-ranking Federal Reserve official along with worries over the market’s valuation.

The Dow Jones Industrial Average dropped 516.81 points, or 2.1%, to 23,247.97. The 30-stock average had its worst day since May 1. The S&P 500 closed 1.8% lower at 2,820 while the Nasdaq Composite fell 1.6% to 8,863.17.  The tech-heavy index also fell back into negative territory for 2020 after Wednesday’s decline.

Fed Chairman Jerome Powell said that more needs to be done to support the economy.

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” he said. Powell added, however, the economy should see a substantial recovery once the coronavirus is under control.

Powell’s remarks came after the Labor Department reported last week that a record 20.5 million jobs were lost in April. They also come as several states begin reopening their economies, raising concern among experts about the potential of a second wave of coronavirus cases.

“Everything is dependent on the next several months and how successful businesses can re-open,” Nick Raich, CEO of The Earnings Scout, wrote in a note. “All the stimulus in the world will not offset businesses closing their doors for an extended time.”

The major averages were also under pressure after billionaire investor David Tepper called this market the second-most overvalued he’s ever seen.

“The market is pretty high and the Fed has put a lot of money in here,” Tepper, founder of Appaloosa Management, told CNBC’s “Halftime Report.” “There’s been different misallocation of capital in the markets. Certainly you are seeing pockets of that now in the stock market. The market is by anybody’s standard pretty full.”

Walgreens Boots Alliance and American Express were the worst-performing stocks in the Dow, falling at least 5.4% each. Energy and financials led the S&P 500 lower by falling 4.4% and 3%, respectively. Bank of America and Citigroup both dropped over 4% while Wells Fargo closed 6.3% lower. JPMorgan Chase fell 3.5%.

Cruise line stocks Carnival, Royal Caribbean and Norwegian Cruise Line all fell at least 5%. Those stocks are among those that would benefit from the economy reopening. Airline stocks reached a fresh low for the crisis, with American Airlines falling 5.6% while Delta slid 7.7%. United Airlines fell 9%.

Chart of the daily percent change in the S&P 500 over the past 11 trading days

Wall Street was coming off of sharp losses from the previous session.

“You have a market just waiting to see how the economy opens,” said Quincy Krosby, Prudential chief market strategist. “You’ve got the S&P 500 at an important technical level, which is 3,000, and it needs a catalyst to climb above that. One of the main catalysts will be if the economy can open up without an increase in cases.”

Dr. Anthony Fauci said Tuesday that a vaccine will be essential in stopping the coronavirus spread, but warned it will be a while before a usable one is available. Fauci added the U.S. could face more “suffering and death” if states start to reopen too quickly.

“Even though market participants know Dr. Fauci’s stand on opening the economy too soon, to hear him testify also helped to underpin the view that if you do move too quickly you run the risk of causing cases to rise,” Krosby said.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

World Cup 2022: Senegal forward Sadio Mane ruled out after surgeryon November 17, 2022 at 9:59 pm

Senegal forward Sadio Mane is ruled out of the World Cup and has surgery on a knee injury he sustained playing for Bayern Munich.Senegal...

Chile wildfires: Nineteen killed as homes destroyedon February 3, 2024 at 7:00 pm

More than two hundred residents have been reported missing in the coastal tourist city of Viña del Mar.At least 19 people have been killed...

Rihanna reveals she’s pregnant at Super Bowl half-time showon February 13, 2023 at 4:07 am

The singer surprised fans as she delivered a hit-heavy performance at the half-time show.Image source, ReutersBy Steven McIntoshEntertainment reporterRihanna delivered an electrifying and hit-heavy...

Liz Truss accused of branding British workers lazy in leaked audioon August 17, 2022 at 7:20 am

The Tory leadership hopeful is accused by critics of branding workers lazy in leaked audio.Image source, PA MediaCritics of Conservative leadership candidate Liz Truss...

Valero Texas Open: Rory McIlroy misses cut and Ian Poulter out of Masterson April 2, 2022 at 9:06 am

Rory McIlroy and Bryson DeChambeau's Masters preparations suffer a blow as they miss the cut at the Valero Texas Open.
Home of Science
Follow me