Dow set to tumble 600 points as investors fear the economy

0
104



The Dow Jones is expected to fall 650 points, or 2%, Thursday as US futures contracts fall. S&P futures fell 1.8% and Nasdaq futures fell 1.3%. US crude oil prices fell 4%.

The growing number of coronavirus cases in the United States has discouraged Wall Street. A second wave of infections could force many businesses to close again immediately after they reopen.

Federal Reserve Chairman Jerome Powell said Wednesday that the economic future is very uncertain. Although he recognized that the May employment report was a welcome surprise, he noted that several million Americans would never return to work and could remain unemployed for years.

The coronavirus could permanently change many parts of the economy, and Fed economists predict unemployment will remain high for several years. Although Powell and the Fed also plan to stay ahead of the stimulus for some time – usually a major boost to corporate earnings and actions – the austere forecasts have rocked investors.

Global stocks also fell sharply. Japan Nikkei 225 ((N225) lost 2.8% and Hong Kong Hang Seng Index ((HSI) down 2.2%. The benchmark for China Shanghai composite ((SHCOMP) abandoned 0.8%. In Europe, Germany DAX ((DAX) 2.7% decline at the start of the session, while France CAC 40 ((CAC40) paid 2.9%. the FTSE 100 ((UKX) fell 2.5% in London.

Coronavirus infections

Since Memorial Day on May 25, the number of hospitalizations for coronavirus has increased in at least a dozen US states, according to CNN aggregated data from the Covid Tracking Project. These are Alaska, Arkansas, Arizona, California, Kentucky, Mississippi, Montana, North Carolina, Oregon, South Carolina, Texas and Utah.

As the country’s states reopen their economies, people are forced to live alongside the virus. A closely watched coronavirus model from the University of Washington Institute for Health Metrics and Evaluation was updated on Wednesday and now predicts nearly 170,000 coronavirus deaths in the United States by October 1.

“If the United States fails to control growth in September, we could face worsening trends in October, November and the following months if the pandemic, as we expect, follows the seasonality of pneumonia” said IHME director Dr. Christopher Murray in a statement. declaration.

The number of global cases is also continuing to climb, with nearly 7.4 million confirmed infections reported, according to Johns Hopkins University. Brazil, Russia, the United Kingdom and India have the most cases after the United States. More than 415,000 people worldwide have died.

Dashed hopes

Many investors had bet on a rapid recovery for the world’s largest economy. The S&P 500 jumped into positive territory for the year earlier this week, even as economists officially declared that the US economy was in recession. The Nasdaq surpassed 10,000 points for the first time in history on Tuesday.

But the high number of coronavirus cases in the United States, coupled with dire economic projections from experts, including the US central bank, suggest continued pain for businesses and workers. The dark outlook may now become more difficult to ignore.

Stephen Innes, chief global market strategist at AxiCorp, said Thursday that markets are struggling to digest headlines that indicate new virus epidemics in the United States. “There is nothing eternal about a secondary outbreak,” he said.

The Federal Reserve said on Wednesday that interest rates are unlikely to rise this year or next. Even in 2022, the majority of central bank decision makers believe that rates will remain at current levels.

It's official: the recession started in February

“We are not thinking of raising rates – we are not even thinking of raising rates,” Fed President Jerome Powell told reporters at a press conference.

The Fed does not expect economic difficulties to end anytime soon: it has updated its projections for the year, forecasting a 6.5% drop in US gross domestic product, the largest measure of the economy in 2020.

The central bank has recognized the “enormous human and economic hardship” caused by the pandemic. In December, the Fed expects the unemployment rate to fall to 9.3% from 13.3% in May, but remains well above the rate of 3.5% from February. Millions of people will not return to their old jobs, “and there may be no job for them for a while,” said Powell.

– Faith Karimi, Arman Azad, Joe Sutton and Anneken Tappe contributed to the report.

LEAVE A REPLY

Please enter your comment!
Please enter your name here