Investing.com – Dow plunges on Tuesday as tech market optimism diminished over growing fears that some states relaxing restrictions would trigger a second wave of infections and cause more economic harm.
The Dow Jones Industrial Average plunges by 1.89%, or 457 points, while the S&P 500 dropped by 2.05%, while the Nasdaq Composite fell by 2.06%.
Investor excitement about the economy’s reopening remained cautious as White House health advisor Dr. Anthony Fauci told Congress that the virus is not yet under control and raised fears that several states are reopening business too soon, which may lead to more outbreaks of Covid-19.
The alert comes as data from the task force on coronavirus in the White House showed a increase in new infections over the past week, NBC reported, citing data leaked.
Investor sentiment has also been hit by renewed U.S.-China jitters after lawmakers introduced a bill. Such a bill would allow President Trump to hit China with sanctions if they don’t cooperate with the Covid-19 investigation.
With fears mounting over the second wave of coronavirus, investors seemingly reigned in their bullish technology bets. Causing FAANG to turn pessimistic and end the day in red.
Google-parent Alphabet (NASDAQ: GOOGL) dropped 1.90 percent even as Citigroup increased its price to $1,600 from $1,400 on the tech giant.
A decline in Gilead Sciences (NASDAQ: GILD) and Moderna (NASDAQ: MRNA), the front runners in the race to find Covid-19 drugs, has placed pressure on healthcare. Which had proven resilient in recent sessions on signs of progress on a possible coronavirus vaccine.
Financials, mainly banks, came under pressure as President Trump, after calling on the Fed to offer deeper interest rate reductions, escalated fears about a negative interest rate setting. The Fed has cut rates to within a quarter of zero in the past few months and policymakers have emphasized that negative interest rates are not a proven solution for economic crises.
Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS) and Citigroup (NYSE: C) dropped by over 3%.
Trump was a strong critic of Fed Chairman Jerome Powell and expressed disappointment that the central bank had too rapidly raised rates and consequently slowed down rates.
Investors will search for monetary policy hints at Powell’s virtual conference scheduled for Wednesday, at 9:00 AM ET. It is expected that the Fed chief will offer an economic update but may use the opportunity to push back against the concept of lowering rates below zero.
The Fed’s call to cut further comes as the central bank launched its landmark corporate bond buying program — a move revealed in March to avert a credit crunch.
On the economic front, investors have continued to absorb more proof that the U.S. economy is in recession as core inflation excludes food and energy, with consecutive month-to-month declines reported only for the second time in the 63-year history of the show. 1982 was the last time ING had said.
In news on deals, Grubhub (NYSE: GRUB) has increased by 29 percent following news that Uber Technologies (NYSE: UBER) has sent a bid to the company. The company has not confirmed talks but has also looked at ways of growing shareholder value.