U.S. stocks ended sharply lower on Tuesday, erasing earnings from the previous day as investors tracked gradual economic reopening attempts and weighed tensions between Washington and Beijing.
What are the key indexes doing?
The Dow Jones Industrial Average DJIA, -1.88 percent, fell 457.21 points, or 1.89 percent, to close at 23764.78, marking its highest one-day fall as of May 1.
The S&P 500 index SPX, -2.05 percent lost 60.20 points, or 2.05 percent, to end at 2870.12, while the Nasdaq Composite index COMP, -2.06 percent fell 189.79 points, or 2.06 percent, to finish at 9002.55, cutting off its six-day winning streak.
What drives the market?
New clusters of COVID-19 cases have emerged in countries that have started lifting restrictions on business activity placed to curb disease spread. A development analyst said that a pause may be coming for investors as the U.S. start loosening lockdowns in an effort to reopen the economy.
Six people tested positive over the weekend in Wuhan, the Chinese city where the coronavirus first appeared late last year. Breaking a period of more than a month that had seen the Hubei province register zero infections, reported The Wall Street Journal.
Dr. Anthony Fauci, the leading doctor of infectious diseases in the U.S. government, cautioned that the country will face needless suffering and death if the nation reopened too early during the coronavirus pandemic. As high-ranking health officials stressed in Tuesday’s Senate testimony on the need to step cautiously and broaden research.
Markets are powered daily by reports of easing economic constraints and what that looks like, according to Mark Saylor, Portfolio Manager at Penn Mutual Asset Management. He pointed to some good data from the New York region, but we’re seeing spikes and accidents in places that may be opening too early. Worries about the pandemic’s geopolitical tensions may have led to the afternoon stocks’ market decline after Bloomberg News claimed Republican senators moved to a vote to sanction Chinese officials over Beijing. This comes on the heels of news that the Trump administration directed the Federal Retirement Thrift Board to suspend their investments on Chinese stocks.
For many reasons, we expect China to be back in the headlines, not the least of which is its political benefit for Trump to take a firm line against China, according to Katie Nixon, Northern Trust Wealth Management’s chief investment officer.
Business and travel that are on lockdowns to counter the coronavirus pandemic can possibly lead to bankruptcy of a major U.S. airline, Boeing Co. BA, -2.86%. according to Chief Executive David Calhoun. Calhoun did not mention any carrier and Bloomberg News quoted a Boeing spokesperson as saying that the CEO did not explicitly refer to any airline. In order to provide business support during the coronavirus crisis, the New York Federal Reserve Bank began buying corporate-bond, exchange-traded funds on Tuesday, marking a major extension of the efforts of the central bank to help the economy and financial system.
Even before the Fed began deploying funds, U.S. investment-grade companies were borrowing at a record pace to start the year, with Goldman Sachs analysts now expected issuance to hit an all-time high of $1.5 trillion by 2020.
In U.S. economic reports, as of March, U.S. consumer prices, except food and energy, also dropped by 0.4 percent in April, representing the biggest monthly fall since the government established the indicator in 1957. According to a MarketWatch survey, analysts predicted just a 0.2 percent fall.
Minneapolis Federal Reserve Bank President Neel Kashkari cautioned in a Tuesday morning talk that the U.S. economy is unlikely to bounce back rapidly, thus encouraging the U.S. government to take advantage of the low interest rates to invest on economic support. Yet Thomas Barkin, president of Richmond Fed, said the economy had bottomed out and was poised for a recovery.
Fed vice president Randal Quarles told the Senate Banking Committee on Monday that the central bank should use whatever resources it needs to support the U.S. financial system.
What companies are at the centre?
- Tesla Ltd. TSLA, -0.23 percent. On Monday, chief Elon Musk exacerbated a showdown with local health officials and reopened the Fremont, California-based car-making plant beyond limited operations. President Trump also used Twitter to offer some encouragement to Musk. The car manufacturer’s shares were down 0.2 percent Tuesday.
- Tilray Inc. shares. TLRY, -7.55 pe cent fell 7.6 percent after the British Columbia-based cannabis company reported a wider-than-expected net loss late Monday, but said that the COVID-19 pandemic did not substantially hurt its ability to sell pot to medical and recreational patients.
- Hertz Holdings Global Inc. HTZ, -9.09 percent posted earnings for the first quarter late Monday, showing worsening losses. Shares ended Tuesday at 8.8 percent lower.
- Shares owned by GrubHub Inc. GRUB, + 29.06 percent gained 29 percent after the Uber Technologies Inc. UBER +2.40 percent has made an offer to buy the food supply firm.
- Chesapeake Energy Corp shares. CHK, -3.36% percent plummeted another 15 percent on Tuesday, one day after its “going concern” alert was reissued by the oil and gas company. The stocks are down year-to-date at about 93 percent.
How are other markets trading?
Crude oil prices finished higher on Tuesday, with West Texas Intermediate Crude delivering CLM20 for June, -1.01 percent up $1.64, or 8 percent, to settle at $25.78 a barrel. The price of an ounce of May gold GCM20 -0.04 percent gained $9.10, or 0.5 percent to end at $1.704.40.
The 10 Year U.S. Yield Treasury note TMUBMUSD10Y, 0.660% tumbled to 0.679% 4.5 basis points.
The U.S. dollar lost ground against a six-rival basket with the ICE U.S. dollar index DXY, 0.02% down 0.3%.
Throughout Europe, stocks ended up higher, with the Stoxx Europe 600 SXXP, -1.21% booking a gain of 0.3% and the UK FTSE 100 UKX, -0.96% booking a gain of 0.9%.
Stocks closed largely lower in Asia overnight, with China’s CSI 300 000300, + 0.20 percent relatively unchanged, Hong Kong’s Hang Seng index HSI, 0.01 percent down 1.5 percent and Japan’s Nikkei NIK, -0.48 percent down 0.1 percent.