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Still in the Woods: Markets Cool Off as Covid Infections Mount

Markets regained some of their early morning losses on Tuesday but still ended down for the day, ending hopes for a seven-day rally.

MANHATTAN (CN) — Markets regained some of their early morning losses on Tuesday but still ended down for the day, ending hopes for a seven-day rally. 

By Tuesday’s closing bell, the Dow Jones Industrial Average lost 300 points, a 1% decrease, while the S&P 500 also fell about 0.8%. The tech-heavy Nasdaq posted slight gains for the day, at one point cresting over the 10,000-point mark to settle at 9,953 points. 

Wall Street had been steeping in the warmth of Friday’s jobs report, which showed nonfarm jobs actually rose by 2.5 million last month while the unemployment rate fell to 13.3%. Many question the data, however, noting the Bureau of Labor Statistics itself had warned the response rate on the survey was 15% lower than usual and that the unemployment rate could actually be 3% higher than reported.

While the economic recovery seems to have started, recessionary spasms still ripple through the economy.

A report on Tuesday by the International Air Transport Association says airlines are expected to lose more than $84 billion this year, for a net profit-margin loss of 20%. Airlines will lose only $15.8 billion next year, the group predicts. 

“Financially, 2020 will go down as the worst year in the history of aviation,” IATA CEO Alexandre de Juniac said in a statement. “Provided there is not a second and more damaging wave of Covid-19, the worst of the collapse in traffic is likely behind us.”

De Juniac noted that effective contract tracing and other measures should help the industry, and world economies, regain their footing. “Getting people safely flying again will be a powerful economic boost,” he said. 

Stocks for most major U.S. airlines, which plummeted in March but have since strongly returned, fell again on Tuesday. United Airlines fell about 8%, Delta Airlines fell 7.6%, American Airlines dropped 8.8%, and Southwest Airlines shares lost about 6.3%. 

President Trump hawked airline stocks during his press conference after last week’s jobs report. “Warren Buffet sold airlines a little while ago,” Trump said. “He’s been right his whole life. But sometimes even somebody like Warren Buffet — I have a lot of respect for him — they make mistakes. They should have kept the airline stocks, because the airline stocks went through the roof today.”

Investors now await further news from the Federal Reserve, which meets on Wednesday to discuss whether it will change its federal funds interest rate or create any new stimulus programs.

Many businesses are still waiting for the Fed to unveil its Main Street Lending Program, which is designed to support small- and mid-sized businesses. Though the central bank announced Monday it was expanding the program to cover more businesses and extending the repayment period for the loans, the $600 billion lending program has not yet come online.

The Fed has been widely credited for keeping liquidity flowing and maintaining market calm, but some leading figures want the body — as well as other central banks — to do more.

“The Fed has done miracles in terms of providing liquidity and bringing down the temperature in markets to a point where markets are now blossoming,” International Monetary Fund Managing Director Kristalina Georgieva said Tuesday during a webcast with the U.S. Chamber of Commerce.

Georgieva also said the $9 trillion in global stimulus measures were a much-needed “bridge to the recovery” but that more coordinated measures among countries may be necessary.

“This great lockdown must not lead to great protectionism,” she said.

If the United States and other countries move away from global trade, she added, “we will be poorer, we will see costs going up, the benefits of technological advancements are not going to flow to the poor countries as they should, and it would be a world that would be, unfortunately, also a less secure world.”

Investor enthusiasm has tempered due to a spike in Covid-19 cases in more than a dozen states, particularly in areas that had reopened early. On Monday, Texas saw 638 new cases of the virus, while Florida reported 966 new cases, the first time in a week the Sunshine State saw fewer than 1,000 new cases. 

On Monday, the World Health Organization reported that transmission of coronavirus by asymptomatic patients is “very rare.” Today unfortunately, the WHO official who made the declaration, Dr. Maria Van Kerkhove, clarified her comments to say asymptomatic transmission remains “a big open question.”

Meanwhile, the number of cases of Covid-19 has continued to creep upward. Almost 7.2 million people have been infected by Covid-19 worldwide, while 408,000 have died, according to data compiled by Johns Hopkins University. In the United States, 1.9 million are confirmed to have had Covid-19, while 111,000 have died.

Follow @NickRummell
Categories / Economy, Financial, Health, Securities

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