NEW YORK (Reuters) – Stock markets tumbled on Wednesday on fears about a second wave of coronavirus infections and warnings from Federal Reserve Chairman Jerome Powell that the U.S. faces a “significantly worse” recession than any downturn since World War Two, while bonds rose on a safety bid.
FILE PHOTO: The New York Stock Exchange (NYSE) is seen in the financial district of lower Manhattan during the outbreak of the coronavirus disease (COVID-19) in New York City, U.S., April 26, 2020. REUTERS/Jeenah Moon
Powell’s comments came as parts of the global economy are starting to reopen following lockdowns aimed at curbing the spread of the virus, which has pushed unemployment rates to the highest level since the Great Depression of the 1930s. Benchmark equity indexes are up 25% or more from their March lows in anticipation of further government stimulus programs.
“Earnings season is largely behind us and we have entered the phase two of COVID-19 as de-confinement of economies begins, and that is creating a lot of uncertainties on a daily basis, which is weighing on markets,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners. “We don’t think this is the start of a new correction. Markets went too far, too fast and this is the consolidation.”
MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 1.59% following broad losses in Europe and Asia.
Wall Street posted a second straight day of steep declines. The Dow Jones Industrial Average .DJI fell 516.81 points, or 2.17%, to 23,247.97, the S&P 500 .SPX lost 50.12 points, or 1.75%, to 2,820, and the Nasdaq Composite .IXIC dropped 139.38 points, or 1.55%, to 8,863.17.
Leading U.S. infectious disease expert Dr. Anthony Fauci on Tuesday warned lawmakers that a premature lifting of lockdowns could lead to new outbreaks of the deadly coronavirus, which has killed 80,000 Americans and brought the country’s economy to its knees.
“We now have to see how this reopening plays out, and there are a lot of risks,” said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.
The mood was further soured by proposed legislation by a leading U.S. Republican senator that would authorize President Donald Trump to impose sanctions on China if it fails to give a full account of events leading to the coronavirus outbreak.
Safe-haven assets rose as investors positioned for an extended economic downturn. Benchmark 10-year U.S. Treasury notes US10YT=RR last rose 13/32 in price to yield 0.6492%, from 0.692% late on Tuesday. The dollar index =USD rose 0.19%, with the euro EUR= down 0.28% to $1.0816.
Oil markets, which have plummeted this year due to a combination of a collapse in demand and a supply glut, slid despite expectations of deeper production cuts. U.S. crude CLc1 slipped 1.28% to $25.45 per barrel, and Brent LCOc1 was at $29.20, down 2.6% on the day.
Reporting by David Randall; Editing by Bernadette Baum and Leslie Adler