Disappointing jobs data, diminished consumer confidence, and a flub by the FDA’s chief over a new coronavirus therapy caused markets to pull back somewhat from Monday’s rally.
MANHATTAN (CN) — Lagging economic indicators helped dampen Wall Street on Tuesday as health officials pulled back on their enthusiasm over a new Covid-19 therapy.
By the closing bell this afternoon, the Dow Jones Industrial Average fell about 60 points, a 0.2% decrease. The S&P 500 and Nasdaq did better, comparatively, but still did not match Monday’s gains. The S&P 500 increased by 0.36% while the Nasdaq netted a 0.7% increase.
The dip in markets was a complete reversal from Monday, when Wall Street rallied over news that the Trump administration had authorized emergency use of blood plasma as a treatment for hospitalized coronavirus patients.
Convalescent plasma, which is derived from patients who have recovered from Covid-19 infections, has been used on at least 70,000 patients, according to the Food and Drug Administration.
President Trump called the treatment a “breakthrough” over the weekend at a press conference where Food and Drug Administration Commissioner Dr. Stephen Hahn said the therapy could save 35 out of 100 patients.
Shortly thereafter, however, some scientists — including a one who worked on the underlying study — criticized those comments as overselling the therapy. Hahn did not wait long to apologize for misrepresenting the difference between relative risk reduction, which the data showed, as opposed to an absolute risk reduction. Under the relative risk reduction model, the therapy could improve mortality by 3% to 5% at most.
Hahn called the criticism of his remarks “entirely justified,” but denied that the FDA has been politicized to gin up the therapy.
“I personally could have done a better job and should have done a better job at that press conference explaining what the data show regarding convalescent plasma,” Hahn told “CBS This Morning.”
Some scientists — including former FDA scientists — are skeptical about the therapy’s efficacy. Further, some researchers are now worried that Covid-19 immunity is not permanent, amid the first apparent case of coronavirus reinfection on Monday.
According to data compiled by Johns Hopkins University, more than 23 million have contracted Covid-19 worldwide, while roughly 814,000 have died. In the United States alone, 5.7 million have been confirmed infected while about 177,000 have died.
With more substantive economic indicators coming later in the week — in the form of comments from Federal Reserve Chairman Jerome Powell during the annual Jackson Hole Economic Policy Symposium, as well as the final calculation of U.S. GDP for the second quarter — bullish investors had little to grab hold of on Tuesday.
Disappointing jobs data from Indeed could predict another increase in weekly unemployment claims on Thursday. According to Indeed, job postings fell nearly 21% year over year for the week ending August 21. That marks the second straight week job postings have dipped after the index gradually increased for three months, the company observed.
Indeed counted the largest decreases in the hospitality and tourism sectors where postings are 40% lower than last year.
Consumer confidence also dropped for the second consecutive month, according to The Conference Board, from 91.7 in July to 84.8 so far this month, the lowest mark in six years.
“Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path,” said Lynn Franco, senior director at the board. “Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.”
Things don’t look good on the horizon, either, according to the survey. Consumers claiming business conditions are “good” fell from 17.5% last month to 16.4%, while those who say the current conditions are “bad” increased from 38.9% to 43.6%.
“This is going to be a more challenging situation and reinforces our view that a V-shaped recovery will not happen,” ING chief international economist James Knightley wrote in an investor’s note. “The U.S. economy, which is 70% consumer spending, is unlikely to recover all of its lost output until mid-2022.”
One bright spot was the earnings reports from Best Buy. The company exceeded analyst expectations, posting a 58% year-over-year increase in earnings for the second quarter. The entertainment company’s U.S. online sales rocketed up 242% last quarter compared with the second quarter of last year.
“We are encouraged to see the customer demand for our products and services and are proud of the amazing execution of our teams,” CEO Corie Barry said in a statement. “Products that helped people work, learn, connect, and cook at home, like computing, appliances, and tablets, were the largest drivers of our sales growth for the quarter.”
The company, like many others recently, did not offer any guidance for the third quarter, citing the uncertainty over another stimulus package out of Congress, as well as the potential for the pandemic to stretch into the fall.