U.S. markets and stock exchange traded funds plunge on fears of another round of coronavirus outbreaks and on a poor economic outlook from the Federal Reserve.
On Thursday, the Invesco QQQ Trust (NASDAQ: QQQ) declined 3.4%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) dropped 5.4% and SPDR S&P 500 ETF (NYSEArca: SPY) declined 4.5%. DIA also dipped back below its long-term support at the 200-day simple moving average.
States such as Texas, Florida, and Arizona announced a new wave of infections, with total cases surpassing 2 million in the U.S., Reuters reports. The sudden spike in new COVID-19 cases fueled fears that the rush to reopen economies may have been premature.
“Those who were expecting more of a V-shaped recovery are taking that expectation down this morning in light of the new evidence,” Katie Nixon, chief investment officer at Northern Trust Wealth Management, told Reuters. “Right now, it feels like there’s a fragility around the latest rally.”
According to Reuters, twenty-one U.S. states reported weekly increases in new cases of COVID-19, with Arizona, Utah, and New Mexico all seeing a 40% increase or more for the week ended June 7 compared to the previous seven days. Additionally, new cases in Florida, Arkansas, South Carolina, and North Carolina all rose by over 30% in the past week.
Rising cases “can quite easily reclaim the news headlines especially if there is a second round of lockdowns in certain U.S. states,” Chris Bailey, European strategist at Raymond James, told Reuters.
Further adding to the risk-off market sentiment, Federal Reserve Chairman Jerome Powell warned that the labor market could take years to recover and that millions might not return to their old jobs, the Wall Street Journal reports.
“We’re in this for the long haul,” Altaf Kassam, head of investment strategy for State Street Global Advisors, told the WSJ. “We’re not going to recover quickly, and there will be pain ahead.”
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