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U.S. Fall Sharply In Late-Day Trading Amid Worries About Reopening

wallstreet down 040218 12may20

Stocks turned in a lackluster performance for much of the trading session on Tuesday before coming under pressure late in the day. The major averages pulled back sharply after spending the bulk of the day bouncing back and forth across the unchanged line.

The major averages ended the day just off their lows of the session. The Dow slumped 457.21 points or 1.9 percent to 23,764.78, the Nasdaq plunged 189.79 points or 2.1 percent to 9,002.55 and the S&P 500 tumbled 60.20 points or 2.1 percent to 2,870.12.

The late-day pullback on Wall Street may have reflected renewed coronavirus concerns after Dr. Anthony Fauci warned of "suffering and death" if the country reopens prematurely.

Fauci, the top U.S. infectious disease expert, and other members of the White House coronavirus task force testified before the Senate Health, Education, Labor and Pensions Committee.

"There is a real risk that you will trigger an outbreak that you may not be able to control and, in fact paradoxically, will set you back, not only leading to some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery," Fauci said of premature reopening.

Fauci also told members of the committee that the U.S. is moving in the right direction but does not have "by any means total control of this outbreak."

Stocks have recently benefitted from optimism about the U.S. reopening following the coronavirus-induced economic shutdown.

Hopes for a quick economic recovery have helped the markets shrug off dismal economic data as well as recent signs of a second wave of coronavirus infections in countries like South Korea and China.

Fauci told the committee a vaccine is essential to stopping the spread of the coronavirus but noted a usable vaccine will not be ready in the near term.

"Even at the top speed we're going, we don't see a vaccine playing in the ability of individuals to get back to school this term," Fauci said.

On the U.S. economic front, the Labor Department released a report showing consumer prices decreased in line with economist estimates in the month of April.

Sector News

Commercial real estate stocks showed a substantial move to the downside on the day, dragging the Dow Jones U.S. Real Estate Index down by 4.6 percent to its lowest closing level in a month.

Significant weakness was also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index plunging by 3.9 percent and 3.4 percent, respectively.

BlackRock (BLK) helped lead the financial sector lower after PNC Financial (PNC) announced plans to sell its entire 22 percent stake in the world's largest asset manager.

Housing stocks also moved sharply lower over the course of the session, as reflected by the 3.4 percent nosedive by the Philadelphia Housing Sector Index.

Transportation, software, and steel stocks also saw considerable weakness, as most of the major sectors came under pressure late in the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index and China's Shanghai Composite Index both edged down by 0.1 percent, while Hong Kong's Hang Seng Index tumbled by 1.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the German DAX Index dipped by 0.1 percent and the French CAC 40 Index fell by 0.4 percent.

In the bond market, treasuries regained ground over moving sharply lower over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.8 basis points to 0.678 percent.

Looking Ahead

On Wednesday, the Labor Department is scheduled to release a separate report on producer prices in the month of April.

Producer prices are expected to drop by 0.5 percent in April after dipping by 0.2 percent in March, while core producer prices are expected to come in unchanged after inching up by 0.2 percent.

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