Wall Street plunges to biggest one-day loss since mid-March

New York  —  Wall Street plummeted on Thursday as investors reacted to renewed fears of a pandemic resurgence and digested dour economic forecasts from the US Federal Reserve.

US jobs data appeared to back up the Fed’s gloomy economic projections. New labour department numbers on Thursday showed that another 1.54-million workers filed for unemployment benefits last week.  Total US layoffs caused by the coronavirus pandemic are now at 44.2-million even as businesses try to reopen. 

All three major US stock indexes were down about 5%, posting their worst day since mid-March, when markets were sent into freefall by the abrupt economic lockdowns put in place to contain the pandemic. The Nasdaq snapped a three-day streak of record closing highs.

The sell-off was broad, with all 11 major sectors of the S&P 500 falling 3% or more.

“There’s really no buy point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “It’s pretty much selling all the way through.”

Tim Ghriskey, chief investment strategist at Inverness Counsel in New York, agreed. “Everything’s for sale. There’s fear we’re near a top.”

Deaths of Americans from Covid-19 could reach 200,000 in September, a grim result of the US’s economic reopening before getting growth of new cases down to a controllable level, according to a leading health expert.

At the conclusion of its two-day monetary policy meeting on Wednesday, the US Federal Reserve released its first pandemic-era economic outlook, after which chair Jerome Powell warned of a “long road” to recovery.

Fed outlook

The Fed predicted the US economy would  shrink 6.5% in 2020  and  unemployment would  reach  9.3%. Interest rates were expected to stay near zero at least through to the end of 2022.

“The Fed keeping rates steady through 2022 could give investors the impression that the Fed may be more concerned about the pace of economic recovery than originally anticipated,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta.

A year-on-year drop in core producer prices also reflected the central bank’s disinflationary concerns.

Unofficially, the Dow Jones Industrial Average fell 6.88% to end at 25,132.25 points, while the S&P 500 lost 5.87% to 3,002.97. The Nasdaq Composite dropped 5.19%, to 9,500.39.

Interest rate-sensitive banks dropped after the Fed indicated key interest rates would remain near zero through at least 2022.

Travel-related companies, among the hardest hit by mandated lockdowns, were sharply lower.

Boeing weighed heaviest on the Dow after its top supplier Spirit AeroSystems Holdings announced a 21-day layoff for staff doing production and support work for Boeing’s 737 programme.

Oil falls

Oil prices tumbled about 8% a barrel on Thursday, fuelled by renewed concerns about demand destruction.

Brent crude futures fell $3.18, or 7.6%, to settle at $38.55 a barrel. US West Texas Intermediate crude fell $3.26, or 8.2%, to settle at $36.34 a barrel. Brent and WTI posted their worst daily drops since April 21 and 27, respectively.