US stocks fell the most in 12 weeks as the scorching equity surge came to a screeching halt amid economic nervousness.
The Dow Jones industrial average fell 7.1% on Thursday as all of its 30 blue-chip companies fell. Meanwhile, the S&P 500 fell nearly 6% – approaching the 7% threshold that would trigger an exchange-imposed trading pause. Airlines, cruise lines and travel stocks that have skyrocketed in recent weeks have borne the brunt of the sale. The KBW Bank financial heavyweight index plunged 9% and energy stocks joined a rout in oil. 10-year Treasury yields fell 0.65% as the dollar jumped.
While much of the sell-off of shares was due to the frantic pace of the recent rally, sentiment deteriorated as signs showed that a possible second wave of the pandemic could take hold in some states. Unemployment claims in the United States remained high, underscoring the long-term challenges caused by the pandemic. The report came out a day after the Federal Reserve provided a gloomy economic outlook. Treasury Secretary Steven Mnuchin has said the United States should no longer shut down the economy even if there is a further increase in coronavirus cases.
“The downward movement in terms of rallying has been so mind-boggling. In the last few weeks we could see some pullback,” said Solita Marcelli, deputy director of investments for the Americas at UBS Global Wealth Management. “These are mainly fears of an increase in second wave worries, we also had the Fed yesterday. Their assessment of the economy was a little weaker than the market expected.”
As restrictions are lifted across the country, signs of a second wave of cases have raised alarm bells. More than 2 million people in the United States have been infected so far.